Report: Nvidia Walking away from Arm Deal

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A published article by Bloomberg cites unnamed sources who say Nvidia may be about to throw in the towel on its attempted acquisition of Arm Ltd. In a story headlined “Nvidia Quietly Prepares to Abandon $40 Billion Arm Bid,” the report stated that Arm owner SoftBank is now considering an Arm public offering.

The Arm acquisition would give Nvidia, the leader in GPU chips, a major position in CPUs, tens of billions of which are sold annually by Arm. From an HPC perspective, the deal would bolster Nvidia’s offering within the high performance computing sector, where its GPUs already power the world’s most powerful supercomputer (see Top500 listing), the Fujitsu-manufactured “Fugaku” system at the Riken Center for Computational Science in Japan, in tandem with Arm CPUs.

“Nvidia Corp. is quietly preparing to abandon its purchase of Arm Ltd. from SoftBank Group Corp. after making little to no progress in winning approval for the $40 billion chip deal, according to people familiar with the matter,” reported Ian King, Giles Turner and Peter Elstrom for Bloomberg. “Nvidia has told partners that it doesn’t expect the transaction to close, according to one person, who asked not to be identified because the discussions are private. SoftBank, meanwhile, is stepping up preparations for an Arm initial public offering as an alternative to the Nvidia takeover, another person said.”

The planned deal, announced in September 2020, has run into growing resistance from regulators in China, the EU, the UK and the U.S. Early last month, the U.S. Federal Trade Commission announced it is suing Nvidia, charging that the “vertical deal … would allow (the) combined firm to stifle competing next-generation technologies.” Despite issuing a statement that Nvidia would continue its pursuit of the acquisition, the FTC action has been widely regarded as a possibly fatal blow to the deal.

Central to the controversy is Arm’s long-standing position as a neutral technology licenser that allows customers in a range of markets – manufacturing, automobiles, phones, computers – to use the baseline technology to develop custom Arm chips. Not only regulators but also technology companies, including Qualcomm, Microsoft, Intel and Amazon, have raised objections with regulators over losing open access to Arm technology if the company were owned by Nvidia.

Today’s Bloomberg story follows a January 18 report in EE Times about documents released by SoftBank in response to the UK’s decision to investigate the deal predicting technology “stagnation” and difficulties for Arm to penetrate the hot-growth data center server market if the deal dies.

“The 29-page document details the joint Arm-Nvidia response to the U.K. government’s decision last November to refer the deal for further investigation to the U.K.’s Competition & Markets Authority (CMA),” EE Times reported. “The response emphasizes that without investment from Nvidia, Arm would be seriously disadvantaged in its bid to grow in data center markets and compete against Intel Corp. and x86 incumbents.”

The EE Times story contradicts today’s reporting by Bloomberg that SoftBank is contemplating an Arm IPO.

“The filing also explains why an Arm stock offering is a non-starter while noting that Arm faces stiff competition from emerging RISC-V competitors… ,” EE Times reported. “In dismissing the IPO option, Arm said a stock offering would suffocate its ability to invest, expand and innovate, noting that capital markets demand a focus on short-term revenue growth and profitability. ‘SoftBank considered and rejected an IPO in 2019 and again in early 2020 because the markets would not give SoftBank the necessary return on its investment,’ the filing states.” This in part is because Arm of late has reported relatively flat revenues while dealing with rising expenses and earning pressure, according to EE Times.