Wally Cheng, the global technology M&A head at investment bank Morgan Stanley (MS), told Bloomberg that AI dealmaking is likely to spread across both private and public markets as companies try to fill gaps in chips, power, networking, and infrastructure. While AI semiconductors get most of the attention, Cheng said that the real value is in the systems that support those chips, including memory, networking, power supply, and even real estate.
Meet Samuel – Your Personal Investing Prophet
High conviction NVDA bears now have this Tradr ETFHis comments came during another active week for AI transactions, including Google (GOOGL) and Blackstone’s (BX) $25 billion AI cloud venture and Analog Devices’ (ADI) $1.5 billion deal for Empower Semiconductor. Cheng also warned that valuing AI companies remains difficult because investors have to weigh huge upside potential against real execution risk. Separately, Tammy Kiely, a senior managing director in tech investment banking at Evercore (EVR), made a similar point by saying that buyers need to compare the value a deal could create with the cost of missing out.
In her view, the current AI environment has never been busier or more exciting in her 27-year career because AI is forcing companies to rethink their strategies very quickly. Kiely added that major strategic shifts in technology have often been driven by acquisitions and pointed to Nvidia’s (NVDA) 2019 purchase of Mellanox as an example of a deal that helped the company expand deeper into data center components. She said M&A has been especially strong in technology and semiconductors, with large companies increasingly buying private firms in sizable deals.
Is XLK ETF a Good Buy?
Turning to Wall Street, analysts have a Strong Buy consensus rating on the Technology Select Sector SPDR Fund ETF (XLK) based on 66 Buys, seven Holds, and one Sell assigned in the past three months, as indicated by the graphic below. Furthermore, the average XLK price target of $201.95 per share implies 14.2% upside potential.
