Nvidia Abandons Arm Acquisition

Arm Buyout Canceled

Nvidia had announced in September 2020, that it would buy UK-based chip designer for $40 billion from SoftBank [1]. The deal quickly drew regulatory scrutiny as it had the potential to completely change the chip industry, as the Arm architecture is widely used in mobile devices, powering most smartphones.

SoftBank announced today the termination of the agreement with Nvidia, citing "significant regulatory challenges preventing the consummation of the Transaction, despite good faith efforts by the parties". SoftBank Group Capital Limited (SBCG) will keep the $1.25 billion deposit, in accordance with the agreement, while preparation will start for Arm to go public. [2]

The news come just one week before Nvidia's earnings report, which is expected Wednesday February 16.

Regulatory Scrutiny

The deal had attracted the interest of regulators worldwide, with the latest challenge having be posed by the US Federal Trade Commission (FTC) [3]. In early December the FTC had sued to block the acquisition, noting that "the proposed vertical deal would give one of the largest chip companies control over the computing technology and designs that rival firms rely on to develop their own competing chips", while calling the deal "the largest semiconductor chip merger in history".

The European Commission had also opened a probe and so did the Competition and Markets Authority (CMA) in the UK. In mid-November of 2021, the CMA had escalated its inquiry into a phase 2 investigation. Nvidia had replied with a pointed letter which was published last month, accusing the UK regulator of "romanrticizing" Arm's past and "either ignore or disparage Arm's most powerful competition". [4]

Stock Movement

NVDA.us had registered a more than 40% rally in the fourth quarter of 2021, accompanied by record high in November (346.38). After that, it corrected lower with two negative months and during the current month, it found support above the ascending trend-line from last year's lows. This week started in the front foot, but today's news could lead to a negative open.

Nikos Tzabouras

Senior Market Specialist

Nikos Tzabouras is a graduate of the Department of International & European Economic Studies at the Athens University of Economics and Business. He has a long time presence at FXCM, as he joined the company in 2011. He has served from multiple positions, but specializes in financial market analysis and commentary.

With his educational background in international relations, he emphasizes not only on Technical Analysis but also in Fundamental Analysis and Geopolitics – which have been having increasing impact on financial markets. He has longtime experience in market analysis and as a host of educational trading courses via online and in-person sessions and conferences.

References

1

Retrieved 08 Feb 2022 https://nvidianews.nvidia.com/news/nvidia-to-acquire-arm-for-40-billion-creating-worlds-premier-computing-company-for-the-age-of-ai

2

Retrieved 08 Feb 2022 https://group.softbank/system/files/news/press/2022/20220208/20220208_0_en.pdf

3

Retrieved 08 Feb 2022 https://www.ftc.gov/news-events/news/press-releases/2021/12/ftc-sues-block-40-billion-semiconductor-chip-merger

4

Retrieved 01 Jul 2022 https://assets.publishing.service.gov.uk/media/61d81a458fa8f505953f4ed7/NVIDIA-Arm_-_CMA_Initial_Submission_-_NCV_for_publication__Revised_23_December_2021_.pdf

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