Visualizing the Biggest Tech Mergers and Acquisitions of 2020
The Biggest Tech Mergers and Acquisitions of 2020
For most businesses around the world, 2020 was a year of difficulties, lost business, and economic hardship. For Big Tech, it was a boon.
After COVID-19 hit hard in March, tech companies started to see their customer bases and revenues grow at an increased rate as people were stuck at home and utilizing their services.
Since down markets are the perfect time to consolidate, 2020 also saw big tech companies take the opportunity to grow their business with major mergers and acquisitions (M&A). After a quieter year in 2019 that saw tech investment activity dip, it was a resurgence to expected form.
In this graphic, we visualize the year’s biggest tech deals above $1 billion using data from Computerworld, which tracked the year’s biggest acquisitions.
Deal Activity from the Get-Go
Though 2020 was all about COVID-19 and its impact on the market, the tech sector had major deal flow even before the pandemic began.
By the end of February, six of the 19 biggest tech mergers and acquisitions of the year had already occurred—and the month of February alone saw the most major deals of any month with four.
The first deals of the year were also some of the biggest. Morgan Stanley’s purchase of online brokerage E*TRADE for $13 billion and Koch Industries’ $11 billion completed takeover of software company Infor were the 4th and 5th biggest tech acquisitions of 2020.
Other big moves included purchases from tech and payments firms Salesforce, Visa, and Intuit, as well as private equity firm Insight Partners.
The Biggest 2020 Deals Were Saved for Last
After a quiet March, only a few large deals occurred from April to the summer.
Nvidia’s $6.9 billion purchase of network chip producer Mellanox Technologies in May was more than a year in the making, and Uber’s $2.65 billion acquisition of food delivery rival Postmates in July significantly consolidated the U.S. food delivery scene.
As it turned out, the biggest deals of 2020 were back-loaded for the end of the year. Just under half of 2020’s billion-dollar tech M&As happened from September‒December, including the year’s three largest tech acquisitions:
|Date||Purchaser||Acquired Company||Amount (Billions)|
|2020-12-14||Vista Equity Partners||Pluralsight||$3.5|
Of the 19 deals over $1 billion tracked above, Salesforce and Nvidia were the only companies to make multiple major acquisitions. And although tech saw gains across the sector, most of the major M&A activity was centered around semiconductors.
As 2020 winds down, the market focus on tech is expected to last into 2021. However, the markets and the world at large continue to deal with COVID-19.
The rollout of vaccines has put the world on a timeline to reach a post-COVID era. How will the tech landscape be affected?
Nvidia Joins the Trillion Dollar Club
America’s biggest chipmaker Nvidia has joined the trillion dollar club as advancements in AI move at lightning speed.
Nvidia Joins the Trillion Dollar Club
Chipmaker Nvidia is now worth nearly as much as Amazon.
America’s largest semiconductor company has vaulted past the $1 trillion market capitalization mark, a milestone reached by just a handful of companies including Apple, Amazon, and Microsoft. While many of these are household names, Nvidia has only recently gained widespread attention amid the AI boom.
The above graphic compares Nvidia to the seven companies that have reached the trillion dollar club.
Riding the AI Wave
Nvidia’s market cap has more than doubled in 2023 to over $1 trillion.
The company designs semiconductor chips that are made of silicon slices that contain specific patterns. Just like you flip an electrical switch by turning on a light at home, these chips have billions of switches that process complex information simultaneously.
Today, they are integral to many AI functions—from OpenAI’s ChatGPT to image generation. Here’s how Nvidia stands up against companies that have achieved the trillion dollar milestone:
|Joined Club||Market Cap|
|Peak Market Cap
Note: Market caps as of May 30th, 2023
After posting record sales, the company added $184 billion to its market value in one day. Only two other companies have exceeded this number: Amazon ($191 billion), and Apple ($191 billion).
As Nvidia’s market cap reaches new heights, many are wondering if its explosive growth will continue—or if the AI craze is merely temporary. There are cases to be made on both sides.
Bull Case Scenario
Big tech companies are racing to develop capabilities like OpenAI. These types of generative AI require vastly higher amounts of computing power, especially as they become more sophisticated.
Many tech giants, including Google and Microsoft use Nvidia chips to power their AI operations. Consider how Google plans to use generative AI in six products in the future. Each of these have over 2 billion users.
Nvidia has also launched new products days since its stratospheric rise, spanning from robotics to gaming. Leading the way is the A100, a powerful graphics processing unit (GPU) well-suited for machine learning. Additionally, it announced a new supercomputer platform that Google, Microsoft, and Meta are first in line for. Overall, 65,000 companies globally use the company’s chips for a wide range of functions.
Bear Case Scenario
While extreme investor optimism has launched Nvidia to record highs, how do some of its fundamental valuations stack up to other giants?
As the table below shows, its price to earnings (P/E) ratio is second-only to Amazon, at 214.4. This shows how much a shareholder pays compared to the earnings of a company. Here, the company’s share price is over 200 times its earnings on a per share basis.
|P/E Ratio||Net Profit Margin (Annual)|
Consider how this looks for revenue of Nvidia compared to other big tech names:
$NVDA $963 billion market cap, 38x Revenue
$MSFT $2.5 trillion market cap, 12x Revenue$TSLA $612 billion market cap, 7.8x Revenue$AAPL $2.75 trillion market cap, 7.3x Revenue$GOOG $1.6 trillion market cap, 6.1x Revenue$META $672 billion market cap, 6x Revenue pic.twitter.com/VgkKAfiydx
— Martin Pelletier (@MPelletierCIO) May 29, 2023
For some, Nvidia’s valuation seems unrealistic even in spite of the prospects of AI. While Nvidia has $11 billion in projected revenue for the next quarter, it would still mean significantly higher multiples than its big tech peers. This suggests the company is overvalued at current prices.
Nvidia’s Growth: Will it Last?
This is not the first time Nvidia’s market cap has rocketed up.
During the crypto rally of 2021, its share price skyrocketed over 100% as demand for its GPUs increased. These specialist chips help mine cryptocurrency, and a jump in demand led to a shortage of chips at the time.
As cryptocurrencies lost their lustre, Nvidia’s share price sank over 46% the following year.
By comparison, AI advancements could have more transformative power. Big tech is rushing to partner with Nvidia, potentially reshaping everything from search to advertising.
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