U.S. antitrust officials are taking steps to block chipmaker Nvidia’s (NASDAQ:NVDA) proposed $40-billion U.S. takeover of Arm Ltd., (NASDAQ:ARMH) saying the deal would hobble innovation in semiconductors and undermine Nvidia’s competitors.
The Federal Trade Commission (FTC) said in a news release that the acquisition would deliver Nvidia vast influence over the market by giving the company control over chip designs used by the world’s biggest technology companies, including makers of smartphones, factory equipment and cars.
Arm, owned by SoftBank Group, licenses its technology to hundreds of companies, while competing with none of them. All major chipmakers are Arm customers and many of these companies, including Qualcomm (NASDAQ:QCOM), Intel (NASDAQ:INTC) and Advanced Micro Devices (NASDAQ:AMD), sell chips that compete directly with products from Nvidia.
That reach has made ownership of Arm a contentious issue because of the advantage it might give a new owner, if that acquirer is a chipmaker. Under CEO and Founder Jensen Huang, Nvidia has become the world’s most valuable publicly traded semiconductor maker as investors have bought the stock, backing the expansion into new markets outside of graphics chips.
Nvidia stock took news of the FTC action in stride, closing up 2.2% at $321.26 U.S. in New York trading. Nvidia shares are 146% this year. Nvidia agreed to buy Arm from SoftBank in September 2020 for about $40 billion U.S., setting a record for a chip-industry takeover.