The Nvidia-ARM deal is on its last legs and Softbank needs an exit strategy

Following yesterday’s news (3 December) the FTC is suing to block Nvidia’s ARM acquisition;

Dr Lil Read, Analyst at GlobalData, comments: “The Nvidia-ARM deal is on its last legs. The regulatory environment is much tougher now since Qualcomm has formed a consortium to invest in ARM. The FTC won’t let it be - nor will the UK CMA or the EU regulator. It’s likely that even if the deal managed to clear those hurdles, Chinese regulators would throw another spanner in the works. Tying the acquisition up for another two years is not in anyone’s interest – not Nvidia’s, and certainly not ARM’s. There could be hope for ARM if a non-chip firm recognizes this opportunity for vertical integration – a trend that we increasingly see with the likes of Tesla and Apple.”

David Bicknell, Principal Analyst at GlobalData, says: “As the regulatory noise intensifies, the picture gets clearer: this bid will not get the green light from regulators. There are few alternatives for ARM. It will struggle without backing for research & development (R&D). Softbank desperately needs an exit strategy, but its options are limited. ARM could float in the US or hope that the UK government acts as a white knight and props up the homegrown chipmaker to avoid losing yet another leading UK tech company to the US. It is highly unlikely that a private equity company would want to get involved, though. ARM will need to consider if it prefers a clean buy rather than go for an initial public offering (IPO) with all the uncertainty that would bring. To stand a chance of the bid going through, Nvidia would have to consider previously unthinkable compromises.”

Mike Orme, Consultant Analyst at GlobalData, notes: “The elephant in the room is Apple. Despite relying on ARM instruction set for its foundational A and M series families of chips, Apple has kept quiet. It's an open secret that Apple was offered ARM in 2020. It’s hard to think that Apple is deliriously happy about the prospect of the deal going through.”