Nvidia is planning to abandon its $40 billion acquisition of Arm, according to a report in Bloomberg citing unnamed sources.
Meanwhile, Arm’s owner SoftBank is prepping an IPO for Arm, according to the publication on Tuesday.
Publicly, both Nvidia and Arm remained positive about the acquisition early Tuesday despite the report. “We remain hopeful that the transaction with be approved,” a SoftBank spokesperson told CNBC.
“We continue to hold the views expressed in detail in our latest regulatory filings—that this transaction provides an opportunity to accelerate Arm and boost competition and innovation,” Nvidia added.
An Arm spokeswoman referred all inquiries on the matter to Nvidia.
Nvidia’s attempt to buy Arm has been widely condemned by analysts and has undergone review by government regulators in several countries who believe the deal would give Nvidia an unfair advantage over competitors in the chip industry.
The U.S. Federal Trade Commission has made one of the harshest attacks by suing last month to block the deal on antitrust grounds. “The proposed vertical deal would give one of the largest chip companies control over the computing technology and designs that rival firms rely on to develop their own competing chips,” the FTC said Dec. 2.
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Meanwhile, U.K. regulators are concerned it would create a threat to national security. Nvidia faces review in China as well.
Nearly all the world’s smartphones rely on chips manufactured along the Arm architecture, while those designs play heavily into chips made in China.
Nvidia and SoftBank shares dropped nearly 5% in early trading Tuesday, with Nvidia reaching 222.44 and SoftBank at 21.95 at 10:20 ET. At market close, Nvidia remained down 4.48%, while SoftBank was down 3.57%. For the past five days, Nvidia shares have declined more than 14%, while SoftBank shares have dropped 7.5%.
Management consultant Bharat Kapoor, a partner at Kearney, said he long expected the Nvidia-Arm deal to fail. “It was doomed from Day 1,” he said via email.
He said one of several companies might step up to buy Arm, including Microsoft, Qualcomm or Google. Microsoft might be the best candidate, partly because Microsoft has plans to make its own chips and Arm’s capabilities would help.
In an interview, Kapoor was less enthusiastic about an IPO for Arm. "I have a little bit of concern about an IPO," he said, noting that Arm's history has been to make and license designs and not actual products. "Making chips is super complicated," he said, and linking with another major company like Microsoft would provide Arm with data on what customers need.
"A potential buyer needs to be somebody with the deep pockets to make investments and bring more than money, such as [insightsf on] changing use cases and how semiconductors are being used," Kapoor said. "Very few customers understand usage patterns."
Meanwhile, Nvidia is already sitting on leading edge GPU technology having recently bought three graphics processing unit companies, he noted.
While Kapoor expects the reports to be true that Nvidia would give up on buying Arm, he added that he didn't believe the deal would be consummated from the start. "It would be good for SoftBank and good for Nvidia, if they could have pulled it off."
And Patrick Moorhead, an analyst at Moor Insights and Strategy somewhat agreed. "I wouldn't be surprised if the deal is over, but it's unfortunate because I think the deal would have brought more competition to the PC and server market," he said via email.