Nvidia Abandons $40 Billion Acquisition of Arm: What It Means for the Tech Industry
NVIDIA Drops $40 Billion Acquisition Bid for Arm
NVIDIA has officially decided to terminate its proposed $40 billion acquisition of British chip designer Arm. This decision comes after the deal faced scrutiny from global regulators, resulting in anti-competition investigations across several regions, including the UK, EU, and the US.
In November 2021, the UK Digital Secretary, Nadine Dorries, opted to block the merger pending a 24-week ‘Phase 2’ investigation. With regulatory approval becoming increasingly unlikely, NVIDIA has chosen to abandon the deal. NVIDIA’s Founder and CEO, Jensen Huang, remarked, “Arm has a bright future, and we’ll continue to support them as a proud licensee for decades to come. Arm is at the center of important dynamics in computing… We will partner closely with Arm.”
Despite the success of Arm’s licensees such as Apple, Qualcomm, and Amazon, the company has faced stagnant revenues and increasing costs. SoftBank, which currently owns Arm, previously considered an initial public offering (IPO) in 2019 and early 2020 but ultimately rejected the idea. As Simon Segars, CEO of Arm, noted last month, “We contemplated an IPO but determined that the pressure to deliver short-term revenue growth and profitability would suffocate our ability to invest, expand, move fast, and innovate.”
With the NVIDIA acquisition now off the table, SoftBank may need to reconsider the prospect of an IPO for Arm. Analyst Dr. Lil Read from GlobalData comments, “SoftBank now needs to think of Arm’s future. An initial public offering looks likely… Otherwise, Arm may be ripe for a takeover by a private equity consortium backed by chip-friendly giants such as Apple and Qualcomm.” Some of NVIDIA’s competitors have even expressed willingness to invest in Arm to help keep it independent.
However, if an IPO occurs, Arm could face substantial challenges. The mobile market, which is its largest, is already saturated, making entry into the data center and PC markets—dominated by Intel and AMD—especially tough. In response to the UK’s Competition and Markets Authority, NVIDIA previously stated concern that regulatory pressures might lead Arm to deprioritize the data center and PC sectors, focusing instead on its mobile and IoT businesses.
Expectations in capital markets may push Arm to cut costs to maximize its value, but SoftBank remains optimistic about Arm’s prospects. Masayoshi Son, the CEO of SoftBank Group, expressed confidence in Arm’s role in driving innovation across sectors such as cloud computing, automotive, and the Internet of Things. Following NVIDIA’s exit, Arm has initiated a management overhaul, appointing Rene Haas, the former head of Arm’s intellectual property unit, as its new CEO. Haas, who previously worked at NVIDIA for seven years, will now lead the company during these challenging times.
With the acquisition no longer a possibility, the hope is that Haas will guide Arm in continuing its legacy of semiconductor innovation that has spanned over three decades.
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