NVIDIA's ARM Acquisition May Be Dead In The Water

Way back in September 2020, NVIDIA announced its intention to purchase semiconductor manufacturer ARM for $40 billion. Fast forward almost a year-and-a-half later and now there's word that NVIDIA might be backing away from the acquisition. While neither company has confirmed the notion that NVIDIA is getting cold feet, it wouldn't be shocking considering that the acquisition has faced scrutiny and even lawsuits from regulatory agencies.

Bloomberg reports today that NVIDIA may be gearing up to drop its planned acquisition of ARM, according to unnamed sources familiar with the matter. Today's report paints a rather grim picture for the acquisition, noting not only the regulatory opposition NVIDIA has faced, but also the opposition from major players in the industry, including Microsoft, Qualcomm, and Intel.

While NVIDIA initially promised ARM would remain neutral should the acquisition go through, those competitors aren't convinced that's likely to happen. It's a legitimate worry, too, because ARM supplies processors for many industries, to the point where ARM processors are nearly inescapable. Having NVIDIA – a company that competes in some of those industries – buy up a ubiquitous manufacturer like ARM probably gives many of those major players pause.

The deal has faced its share of regulatory skepticism too. In December 2021, the United States Federal Trade Commission filed a lawsuit against NVIDIA to block the merger, arguing that if NVIDIA took over, it would have too much influence over the semiconductor industry. The deal has also faced scrutiny from regulators in Europe, and Bloomberg's report today claims that China is ready to stop the merger if other regulators don't.

All things considered, NVIDIA has a difficult uphill battle ahead of it if it wants to press on with this acquisition. Today's report states that NVIDIA's original timeline of 18 months to complete the acquisition seems unlikely now, and notes that the original agreement between the two will expire in September 2022 if it isn't approved by then.

Despite the opposition, NVIDIA and ARM still seem outwardly confident that the deal can go through, with spokespeople for both companies issuing optimistic – if uninspiring – statements to Bloomberg when reached for comment. "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," NVIDIA's Bob Sherbin said, with a spokesperson for SoftBank (ARM's current owner) saying only, "We remain hopeful that the transaction will be approved."

Behind the scenes, however, we're now hearing that NVIDIA is "quietly preparing to abandon" the deal. We'll see what happens, but given all of the regulatory pushback we've seen over the past year and change, NVIDIA may have no choice but to drop the acquisition and keep its hands off the semiconductor giant.