Ark files for bitcoin ETF, Nvidia gets support for Arm acquisition

Brian Sozzi and Myles Udland breakdown Tuesday’s early market movers, which include: Nvidia stock rallying after garnering the support of three key chip makers for its proposed acquisition of Arm and Cathie Wood’s Ark Invest filing with the US SEC to launch a Bitcoin exchange-traded fund.

Video Transcript

MYLES UDLAND: Sozzi, I still feel like I'm saying 2020 in my mind, but this year almost half over as we careen forward in time. Let's take a look at futures here-- set for a mixed open-- reversal, really, from what we saw in yesterday's session. The NASDAQ coming back a little bit here as we edge towards the opening bell.

NASDAQ closing at a record yesterday. We saw the S&P and the Dow under a little bit of pressure-- some of that rotation towards growth, away from those value names [INAUDIBLE] See our live pictures from the floor of the New York Stock Exchange [INAUDIBLE] opening bell.

And the company's CEO is going to join us in the next hour to discuss their initial debut and, of course, the prospects for their core business. But let's talk about a couple of names here that have been on the move in the market recently. We see all three majors in the green, at the opening indication here, Sozz.

You flagged this for us yesterday-- Nvidia shares have just been on a tear. And we know the semiconductor shortage and then the resulting, likely, expected supercycle of investment into that space that is anticipated by so many investors. But this stock continues to rip higher in the market.

BRIAN SOZZI: Myles, I'm still trying to digest what David Kostin told us about the markets. But if I have to talk Nvidia, I, in fact, will. And I think what you're seeing here-- the stock is up about 23% over the past month, according to Yahoo Finance+ data really for two reasons.

One, the stock's rally was kicked off after the company a couple of weeks ago reported an absolute blowout quarter, and they suggested that momentum likely has continued into the second quarter. I mean, their revenue guide for the July quarter was 15% above consensus. And we'll talk a little bit about your newsletter, Myles, a little later on the show, you're talking about earnings estimates.

But I'm really wondering if the Street has modeled correctly Nvidia's earnings estimates moving forward just based on the momentum they have in the gaming segment, in the data segment, and yes, even still the crypto segment despite crypto's broader pullback. And then lastly, over the past two or three sessions, the rally has been fueled by positive developments on the ARM front.

I mean, they came out in September last year and said they're going to try to acquire ARM for $40 billion-- a lot of regulatory concerns about this deal around the globe. But now a lot of companies such as Marvell, Broadcom recently have come out in support of this deal saying it won't hurt competition. And hence, you're seeing Nvidia shares on the rise.

MYLES UDLAND: Sozzi, I got one for you here. So if you look at the companies that have market caps in the mid-- mid-nine figures-- you know, Nvidia right now right around $600 billion-- who's a trillion dollar company first, Tesla or Nvidia-- basically saying market cap as of this morning.

BRIAN SOZZI: I'm going to go-- well, first of all, we don't pick stocks here on Yahoo Finance. I will just note that up front.

MYLES UDLAND: Of course. Of course.

BRIAN SOZZI: Because this is a back way into picking a stock-- I'm just saying, Myles. I'm just saying. But Nvidia-- I think Nvidia has a severely larger moat around its business compared to what we're seeing out of Tesla. We'll talk a little bit later too on what UBS wrote today on Tesla, discussing the competitive forces in the auto industry right now.

Ford's hitting Tesla. GM is hitting Tesla. Toyota is hitting Tesla. And then you also have all these electric vehicle companies in China right now also hitting Tesla. I don't see anybody necessarily hitting Nvidia, especially if they close on this ARM deal. It's going to be huge.

MYLES UDLAND: Now, when you hear Tesla and Nvidia, someone that is not far behind that is Cathie Wood-- interesting development out of Wood's Ark Invest yesterday. The company filing with the SEC to have a Bitcoin ETF. Now, there's not going to be a review of any pending Bitcoin ETFs until the fall.

This also marks the 12th company that has at least filed to have a product along these lines. But, Sozzi, you know, we talk so much about the price of Bitcoin and what is driving cryptocurrencies in general, and I think it's maybe a side part of the conversation at this point. But there has been, for some time now, conversation around how positive a Bitcoin ETF-- a more easily tradable product for investors who don't want to do the work of figuring out their storage, their wallets, maybe their cold storage, maybe it's easier for institutions to get some kind of exposure to Bitcoin if there's an exchange-traded fund that tracks the price.

But I guess you could say, you know, maybe a name like MicroStrategy, or Coinbase, or some others-- via blockchain-- they're proxies in a way for the cryptocurrency space in general, but there is no pure play. I mean, there's the GBTC Trust, but there's no ETF that is Bitcoin. And there's many pending applications.

We'll see if they, indeed, get approved. But one hand, not a huge surprise to see Ark get involved there, but on the other hand, in what could be a very competitive space, Sozzi, I imagine that the way Ark has positioned itself, especially with retail traders, they would seem to be a potential big winner should their application get approved.

BRIAN SOZZI: Right, Myles. And Cathie Wood has been involved with Bitcoin or cryptocurrency since 2017. So she's very familiar with the space. This is very much something right up her alley. But I know you're an avid filings reader, Myles-- look at this filing that they put out on this potential transaction.

One of the risk factors-- it just says in bold font, Bitcoin generally. That's a key risk factor. And they're noting in the filing the market value of Bitcoin is not related to any specific company, government, or asset.

And you scroll down a little bit more-- another risk factor, momentum pricing-- that's it, just in bold italic letters. Another one-- a decline in the adoption of Bitcoin could negatively impact the trust. So it's just interesting to read language like this, which is so different, in many respects, to when a company IPOs and the language they put in their prospectus.

MYLES UDLAND: Yeah, I mean, look, SEC filings are an absolute gold mine of interesting nuggets on how businesses think about themselves, about how businesses believe they need to hedge their description of their business, or associated risk, et cetera, et cetera, et cetera.

But I think, you know, going to that specific point, Sozzi-- and it reminds me of a conversation we had with Jamie Cox yesterday, but I think that we'd have with any, let's call it, a mainline fiduciary, right-- someone who's in very traditional financial markets-- folks aren't comfortable recommending Bitcoin, because they, essentially, all acknowledge what was in Ark's filing, which is that there's nothing you can definitively say underpins the price of Bitcoin.

There are very good arguments one can make about why the price has done this, that, or the other, and will do something going forward. But you cannot go into a traditional modeling, discounted cash flow type analysis for Bitcoin, and it really is what keeps so many institutions on the sideline in terms of being able to credibly recommend for their clients that you need to have an allocation to this asset.

And I think in some ways, if you're a real crypto believer, you almost want it to stay that way, because then you have the edge, right? You arbitrage the financial industry's need to justify investments in a specific way, thus meaning that there are fewer people who can get exposure to something they want exposure to, and kind of keeps your leverage, if you will, on the space, on reaping gains in the space, so on and so forth, you know, in a way that I think is unique.

BRIAN SOZZI: Myles, I have one for you here-- Nvidia doubling or Bitcoin 100,000 first. I put that to you.

MYLES UDLAND: Well, Bitcoin would have to triple to get to 100,000, so I'll take a flyer on Nvidia doubling before Bitcoin gets to 100,000. So there you go. So I guess we're both Nvidia bulls today. That's the takeaway here?

BRIAN SOZZI: That's the takeaway. Hot take. Hashtag hot take.

MYLES UDLAND: Never stock recommendations on this program. Nothing's investing advice. And of course, you should definitely not listen to either of us.