Several semiconductor stocks tumbled sharply early Monday, with Nvidia and AMD down about 6%, following news last week that the U.S. Federal Trade Commission sued to block Nvidia’s proposed buy of Arm for $40 billion.
NXP shares were down by 4%, while Qualcomm was down by nearly 3% before recovering somewhat before noon ET. Analog devices was down 4% as well and then recovered some as well.
The FTC said Nvidia’s deal would “stifle” the innovation pipeline for next-gen technologies. Many semiconductor companies depend on the Arm architecture for chip designs and the FTC is worried Nvidia would gain too much control over those designs, even to the point of gaining an antitrust advantage with its competitors.
“The proposed deal would distort Arm’s incentives in chip markets and allow the combined firm to unfairly undermine Nvidia’s rivals,” an FTC official said last week.
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The threat from the omicron variant had hit markets hard a week ago, but the Dow was up in a Monday rally and even the tech-heavy Nasdaq was up slightly at noon despite the downward direction for chip stocks.
Nvidia’s position improved some at noon to $292.23, down 4.79% for the morning. Nvidia improved to $300.37 at the end of trading Monday, but had dropped 9.5% over the past five days. AMD finished the day Monday at $139.06, after opening at $141.04 and slipping mid-day to $135.11. The five-day loss for AMD was 14.8%.
SoftBank, the owner of Arm, saw its shares drop on the Tokyo stock market from 5201 yen to 5103 yen, and as low as 5,062 yen. The Philadelphia semiconductor sector index of the 30 largest companies was down by 1.26% at noon Monday after declining 2% earlier Monday.
Some analysts have predicted the Arm deal is unlikely to be approved following the FTC complaint, which comes amid concerns by other regulatory bodies in the UK, EU and China.
The Arm acquisition is “unlikely [to] go through,” Gartner chip analyst Alan Priestley said last week in comments to CNBC.
Nvidia has stuck by its guns, however, saying last week it would work with the FTC. “We will continue to work to demonstrate that this transaction will benefit the industry and promote competition,” a spokesman said last week.