Nvidia May Bail On $40B Arm Deal As SoftBank Ponders Arm IPO: Report

A new report from Bloomberg says Nvidia has told partners that it doesn’t believe its $40 billion acquisition of Arm will close after facing stern pushback from regulators. At the same time, Arm’s current owner, Japan-based SoftBank Group, is reportedly considering the possibility of taking Arm public as an alternative. Spokespeople for Nvidia and SoftBank maintain that the blockbuster chip deal is still on.

Nvidia may bail on its plan to acquire British chip designer Arm for $40 billion in the face of stern pushback from regulators, according to a Tuesday Bloomberg report that cited multiple sources.

The Santa Clara, Calif.-based company has told partners that it doesn’t believe the blockbuster chip deal, which was announced in September 2020, will close, Bloomberg reported, citing an unnamed source. At the same time, Arm’s current owner, Japan-based SoftBank Group, is reportedly considering the possibility of taking Arm public through an initial public offering as an alternative.

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Nvidia’s stock price was down 3.3 percent Tuesday morning.

An Nvidia spokesperson told CRN that the deal is still on.

“We continue to hold the views expressed in detail in our latest regulatory filings—that this transaction provides an opportunity to accelerate Arm and boost competition and innovation,” the Nvidia spokesperson said, repeating a statement provided to Bloomberg.

A SoftBank spokesperson told CRN that the company intends to continue with its sale of Arm to Nvidia.

“We remain hopeful that the transaction will be approved,” the SoftBank spokesperson said.

Several analysts said the Nvidia-Arm deal is unlikely to go through after the Federal Trade Commission in December sued to block the acquisition over antitrust concerns, adding to concerns by other regulators that the merger would harm competition.

Bloomberg said Nvidia and Arm leaders are continuing to make their case to regulators and that they have not yet made a definitive decision on whether to can the deal. The news organization added that some at Nvidia believe the death of the Arm deal is a foregone conclusion while others think they can turn the tide in Nvidia’s favor in the trial for the FTC’s lawsuit.

In its December lawsuit, the FTC said Arm’s role as the “Switzerland” of the semiconductor industry is a prime reason why it believes Nvidia’s acquisition of the British chip designer would harm competition in the data center market, among other markets.

Many companies, including Apple and Amazon, license Arm’s technology to build their own processors, and Nvidia’s direct rivals, Intel and AMD among them, also rely on Arm for some products such as FPGAs and SmartNICs. AMD uses Arm for security chips in its EPYC server processors.

If Nvidia were to acquire Arm, the FTC alleged that it would create uneven access to Arm’s technology between Nvidia and other companies. This would reduce competition and, in turn, reduce product quality, innovation and choice while also increasing prices for customers, the agency said.

Nvidia has repeatedly promised that it would invest in Arm’s research and development, maintain Arm’s open licensing model and “create more opportunities for all Arm licensees and expand the Arm ecosystem.” This, however, hasn’t allayed the concerns of the FTC and other regulators, including the United Kingdom’s Competition and Markets Authority, which is investigating the deal.

Ben Bajarin, CEO and principal analyst at Creative Strategies, previously told CRN that he doesn’t believe an IPO would be a great option for Arm because the chip designer’s business model is not one that would fare well under quarterly or yearly pressure from investors.

“Licensing businesses are just not giant growth businesses. The ramp is very, very small at times. It could be years before they grow. And unfortunately, in this situation, in order to grow, they need a lot of money because they need to be investing in parallel categories beyond mobility,” he said.