Report suggests NVIDIA is preparing to walk away from its ARM acquisition

ARM may be planning an IPO if the deal falls through.

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NVIDIA has reportedly made little to no progress in gaining regulatory approval for its $40 billion purchase of ARM and is privately preparing to abandon the deal, according to Bloomberg's sources. Meanwhile, current ARM owner SoftBank is reportedly advancing a program to take ARM public as an alternative to the acquisition, said another person familiar with the matter.

NVIDIA announced the deal in September 2020, with CEO Jensen Huang proclaiming it would "create a company fabulously positioned for the age of AI." ARM's designs are used under license almost universally in smartphones and other mobile devices by companies like Apple, Qualcomm, Microsoft, Samsung, Intel and Amazon.

A backlash began soon after the announcement. The UK, where ARM is based, launched an antitrust investigation into the acquisition in January 2021, and another security probe last November. In the US, the FTC recently sued to block the purchase over concerns it would "stifle" competition in industries like data centers and car manufacturing. China would also reportedly block the transaction if other regulators don't, Bloomberg's sources say.

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.

Companies like Intel, Amazon and Microsoft have reportedly given regulators enough information to kill the deal, the sources say. They previously argued that NVIDIA can't preserve ARM's independence because it's an ARM client itself. As such, it could also potentially become both a supplier and competitor to ARM licensees.

Despite the stiff headwinds, both companies maintain that they're still pushing forward. "We continue to hold the views... that this transaction provides an opportunity to accelerate ARM and boost competition and innovation," NVIDIA spokesman Bob Sherbin told Bloomberg. "We remain hopeful that the transaction will be approved," a SoftBank spokesperson added in a statement.

Despite the latter comment, factions at Softbank are reportedly pushing for an ARM IPO as an alternative to the acquisition, particularly while the semiconductor industry is so hot. Others in the company want to continue pursuing the transaction given that NVIDIA's stock price has nearly doubled since it was announced, effectively increasing the transaction price.

The initial agreement expires on September 13th, 2022, but will automatically renew if approvals take longer. NVIDIA predicted that the transaction would close in approximately 18 months — a deadline that now seems unrealistic.