Nvidia Stock Just Jumped After Its $2 Billion AI Investment. Here's What History Says Happens Next.

Shares of Nvidia (NASDAQ: NVDA) have popped by close to 9% since the opening of trading on March 31, the day that the GPU maker announced its $2 billion investment in, and strategic partnership with, Marvell Technology (NASDAQ: MRVL).

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The deal gives Nvidia access to Marvell's semi-custom chips and optical interconnect capabilities, technologies that are crucial for moving massive amounts of data across increasingly complex systems. As artificial intelligence (AI) data centers scale up in size, Marvel's custom chips and networking solutions, which are compatible with Nvidia's NVLink Fusion platform, can help address bottlenecks in memory bandwidth, power efficiency, and interconnect speed.

By strengthening its position in these areas and enabling broader interoperability across AI infrastructure, Nvidia is reinforcing its role as a full-stack AI platform provider.

What does history show?

To get a sense for what the impact of this partnership will be, investors should look at some of Nvidia's past acquisitions. The clearest parallel is its 2019 purchase of Israeli chip designer Mellanox Technologies. While that deal was initially viewed as a way to strengthen its networking portfolio, it has since become a crucial factor in driving Nvidia's dominance in data centers. Nvidia bundles Mellanox's high-speed networking technologies into its processors to power large-scale AI systems.

Nvidia's long-term strategy involves recognizing key bottlenecks, acquiring or partnering with companies that can address those constraints, and then monetizing those capabilities over the long term.

Its Marvell partnership fits this template. As they more deeply integrate their respective technologies, Nvidia will embed itself more deeply into custom silicon and next-generation interconnect technologies, including emerging approaches such as silicon photonics for data centers. Since Marvel also works with hyperscalers developing their own AI chips, this partnership will allow Nvidia to remain involved even as customers explore alternatives to its GPUs.

Additionally, Nvidia will be able to sell more integrated, end-to-end AI systems and capture system-level value rather than relying primarily on its chip pricing power. The deal also opens opportunities for Nvidia beyond hyperscalers, in areas such as telecom networking, edge data centers, and AI-RAN (artificial intelligence--radio access network). The integration of artificial intelligence into radio access networks enables telecom infrastructure to run both connectivity and AI workloads on the same platform.

Share price impact

History suggests that while strategic acquisitions and partnerships often prove highly valuable, their financial impact unfolds gradually. The Mellanox deal did not immediately transform Nvidia's financial results, but eventually, the technology that the company gained became a key catalyst for its data center growth. Periods of short-term weakness in Nvidia's stock have also historically been followed by recoveries as the market returns its focus to business fundamentals.

Nvidia stock recently experienced a rare two-quarter losing streak. However, over the past decade, whenever it has had a losing streak of two or more months, when those downtrends have ended, in the months that followed, it has delivered an average 1-month gain of roughly 12%.

However, the current environment is more complex. Investor concerns about increasing AI infrastructure spending and rising geopolitical pressures can affect Nvidia's share prices. As a result, while history suggests the stock should be headed for a rebound, the stock's trajectory may be more volatile this time.

Manali Pradhan, CFA has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Marvell Technology and Nvidia. The Motley Fool has a disclosure policy.