The $40 billion deal between Nvidia and ARM is in danger of falling apart

Bloomberg’s sources revealed that Nvidia has informed its partners that it does not expect the deal to be completed. Meanwhile, SoftBank is also preparing for ARM’s initial public offering (IPO) as an alternative.

When Nvidia announced the purchase of ARM in September 2020 for $ 40 billion, many people commented that this was the largest semiconductor acquisition in history. However, the transaction quickly received backlash from chip industry authorities and stakeholders, including ARM customers. The US Federal Trade Commission (FTC) filed a lawsuit to block the sale, arguing that Nvidia would become too powerful if it controlled ARM’s chip designs.

The deal has also been opposed in China, where authorities are inclined to block it if one country accepts it. According to the source, Nvidia and ARM management is still complaining about the case to the regulators and no decision has been made yet. In public, the two sides still maintain their commitment to the sale.

An Nvidia spokesperson said the transaction will provide an opportunity to promote ARM and increase competition and innovation. A SoftBank spokesman also expressed his desire for the deal to be approved.

If Nvidia succeeds in acquiring ARM, it will be a big moment for CEO Jensen Huang, who has built a tiny graphics card business into a semiconductor empire. Currently, he is holding the largest semiconductor company in the United States with a market capitalization of more than half a trillion dollars. However, this will not be an easy battle. In 2018, Qualcomm also had to withdraw from its $44 billion acquisition of NXP Semiconductors after nearly two years of legal obstacles.

ARM acquisitions come under scrutiny as ARM’s chip designs appear in everything from phones to cars to factory equipment. Neutral is the business foundation of the British chip designer. The world’s largest technology businesses are all dependent on ARM, which they fear will lose their neutrality when ARM is under Nvidia’s control.

That led to a series of “big guys” against the deal. A group including Qualcomm, Microsoft, Intel, Amazon provided evidence to global authorities to terminate the transaction, according to the source. They argue that Nvidia cannot maintain ARM neutrality because Nvidia itself is an ARM customer. Nvidia is competing with Intel in the server chip market and provides chips for Amazon and Microsoft cloud services. Thus, Nvidia is both a partner and an enemy.

In addition to the US and China, Nvidia and ARM also have to pass European and UK regulators. In China, it seems difficult to get the “nod” of the authorities when US-China tensions are escalating. The US has sought to block China’s semiconductor industry from accessing the latest technology, while many Chinese chip companies are ARM customers. Therefore, Beijing has more reason to keep ARM from falling into the hands of the US.

Whether the deal is successful or not, SoftBank and ARM still have Nvidia’s $2 billion under the contract.