Nvidia told partners that the deal was not expected to go through, according to people familiar with the matter. Parent company SoftBank is considering an IPO for Arm as an alternative. Nvidia Corp is quietly preparing to abandon its acquisition of Arm Ltd from SoftBank Group. , as the $40 billion chip deal has made little progress toward approval.
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Nvidia has told partners it does not expect the deal to go through, said a person familiar with the matter, who asked not to be named because the content is not public. Meanwhile, SoftBank is gearing up for an initial public offering (IPO) of Arm as an alternative to a takeover, another person familiar with the matter said.
The acquisition, which was expected to be the largest semiconductor deal in history when it was announced in September 2020, has sparked a backlash from regulators and the chip industry, including from Arm’s own customers. The FTC filed a lawsuit in December to block the deal, arguing that Nvidia would become too powerful if it gained control of Arm’s chip designs.
The leadership at Nvidia and Arm are still trying to convince regulators and have not made a final decision, the people said. In addition, the company is also maintaining its commitment to the acquisition.
Nvidia spokesman Bob Sherbin said, “We continue to maintain the views detailed in our latest regulatory filing – that this transaction provides an opportunity to accelerate Arm’s growth and foster competition and innovation.”
“We remain hopeful that the deal will be approved,” a SoftBank spokesman said in an emailed statement.
If Nvidia successfully closes the deal, it would be a sea change for CEO Jen-Hsun Huang. Huang Renxun built the graphics card business into a chip manufacturing empire. Nvidia is already the most valuable U.S. company in the semiconductor industry, with a market value of more than $500 billion.
But it will be an uphill battle. Qualcomm ended its $44 billion acquisition of NXP Semiconductors in 2018 after nearly two years of regulatory hurdles.
The sale of Arm has come under scrutiny because the company’s chips are designed to be used in everything from mobile phones to cars to factory equipment, making neutrality the foundation of the company’s business model. The world’s largest tech companies rely on Arm’s technology, and they worry that after Nvidia acquires Arm, it may no longer have unimpeded access.
Tech giants line up against takeovers. A group of companies, including Qualcomm Inc, Microsoft Corp, Intel Corp and Amazon.com Inc, has given regulators around the world reasons they believe are sufficient to end the deal, according to people familiar with the matter.
The ordeal has created divisions within Nvidia. Some at the company have given up hope for the acquisition, but others believe management could use the FTC lawsuit to justify the deal.
Within SoftBank, some factions want to slow down the acquisition process, especially as a rise in Nvidia’s stock price makes the deal more valuable. Even after the recent slump, Nvidia stock has nearly doubled since the Arm deal was announced. This adds tens of billions of dollars to the original $40 billion purchase price.
At a time when the chip industry is still seen as attractive to investors, others at SoftBank are more inclined to let Arm IPO as soon as possible. Concerns about a slowdown in the industry have surfaced.