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NVIDIA walks way from Arm deal

NVIDIA (NVDA -1.2%) announced today it will terminate its deal to acquire Arm Limited from SoftBank Group (see 4:20 comment). Instead SoftBank will seek to spin off Arm in an IPO. NVDA is known for making graphics chips for videogames, but its real sweet spot is data center chips. Arm is a bit different. It’s not a manufacturing company, it’s more of a neutral designer of chips and it licenses its technology to a wide variety of semiconductor companies.

The deal was announced back in September 2020 that it would pass regulatory scrutiny and the companies are now citing “significant regulatory challenges” for killing the deal. Both the US and China would have needed to sign off on the transaction.

Because Arm’s designs are used by lots of chip companies in everything from sensors to smartphones to supercomputers, it’s understandable to question whether it’s smart to let them be owned by another company. Also not helping is that the US blocked Broadcom’s (AVGO) bid for Qualcomm (QCOM) a couple of years ago on similar grounds. So we could see China not being too happy about this deal.
What’s interesting is that there is no talk of SoftBank looking for another buyer, probably because the same issues would arise, so instead it’s going the IPO route.

Bottom line, Arm is known as a neutral provider of technology and this deal might have tarnished that position. Also, many of NVDA’s competitors are licensees of Arm so we can understand that they would not be keen on this deal going through. We suspect regulators heard an earful from them. It’s probably better Arm stays independent and goes public on its own. –