Nvidia Corp Scraps $40 Billion Deal to Buy Arm from SoftBank

US-China Semiconductor War

US-China Semiconductor War

SoftBank Group Corp's sale of Arm Ltd to U.S. chipmaker Nvidia Corp has collapsed, a source familiar with the matter told Reuters on Monday, adding that Arm would plan for an IPO instead of the sale, which would have been worth as much as $80 billion.

The deal, announced in 2020, has faced several regulatory hurdles. The U.S. Federal Trade Commission sued to block it in December, arguing that competition in the nascent markets for chips in self-driving cars and a new category of networking chips could be hurt if Nvidia carried out the purchase.

nvidia studio
Nvidia Studio YouTube grab

The buyout is also under the scrutiny of British and EU regulators amid concerns that it could push up prices and reduce choice and innovation.

It also had yet to receive approval from anti-monopoly regulators in China, which have withheld approval of cross-border chip acquisitions that other countries have green-lit.

Most Valuable US Chip Company

The deal's collapse could also affect a legal dispute between Arm's China joint venture and Allen Wu, the joint venture's original CEO.

Nvidia has become the most valuable U.S. chip company on the strength of its graphic processor chips. Although still seen as crucial for gaming, graphic processors have become much more widely used for artificial intelligence and other advanced fields.

The sale would have marked an early exit from Arm for Softbank, which acquired it for $32 billion. Chief Executive Masayoshi Son has lauded the potential of Arm, but is slashing his stakes in major assets to raise cash.

An Arm acquisition would have put Nvidia into even more intense competition with rivals in the data center chip market such as Intel and Advanced Micro Devices Inc.

Arm licenses its architecture and technology to customers such as Qualcomm Inc, Apple and Samsung Electronics Co Ltd that design chips for devices from mobile phones to computers.

SoftBank Logo YouTube Grab

Nvidia and SoftBank declined to comment. Arm did not immediately respond to a Reuters request for comment. Arm China declined to comment.

The value of the deal, which depended on Nvidia's stock price, was originally pegged at about $40 billion and rose with Nvidia's stock price to as much as $80 billion late last year, though the California company's stock has fallen since.

A Nvidia spokesperson in January, as questions over the future of the deal increased, said the company believed the acquisition "provides an opportunity to accelerate Arm and boost competition and innovation."

The Financial Times was the first to report that Softbank's Arm-Nvidia deal had collapsed.

The Japanese investment giant would receive a break-up fee of up to $1.25 billion, FT quoted one of the people as saying.