If the murmurings of Bloomberg's sources are to be believed, we are at a very interesting pivot point in the long saga of Nvidia's attempted ~$70 billion acquisition of Arm. The heavyweight financial journal cites two unnamed sources behind its assertions that Nvidia is quietly preparing to abandon its Arm takeover plans. The deal falling through will undoubtedly be particularly painful for Nvidia because it agreed to pay SoftBank Group $1.25 billion if the Arm acquisition failed. Nvidia pre-paid the penalty when the deal was announced.
Bloomberg has a decent track record with behind-the-scenes business information, but as the statements it has received from both Softbank and Nvidia execs attest, work on the deal is still ongoing as both parties still work purposefully to satisfy regulatory checks worldwide.
However, Bloomberg says two key 'people familiar with the matter' have come forward, with background knowledge from Nvidia and Softbank, respectively. From the Nvidia side of the leak, the publication says, "Nvidia has told partners that it doesn't expect the transaction to close." Meanwhile, Bloomberg says the Softbank-related source says that the Japanese tech company is "stepping up preparations for an Arm initial public offering as an alternative to the Nvidia takeover."
Nvidia and Softbank first publicly agreed to the $40 billion deal back in September 2020. At the time, the two parties hoped to close the proceedings within approximately 18 months. Going by that estimate, the deal should have concluded by March 2022, but it became apparent that there were many hurdles in the way of the acquisition.
As well as facing a growth in the intensity of interest by the likes of the US FTC, the UK's CMA, and the European Commission, Bloomberg's sources think China would likely oppose the acquisition and upset the whole carefully balanced applecart.
We got an insight into Nvidia and Softbank/Arm's persuasiveness with regulators a fortnight ago, when the hopeful partners painted a picture of Arm stagnation if Nvidia didn't come to the rescue with its healthy bank balance and R&D resources. The keen-to-be wedded parties even went so far as hinting that Arm would be asset-stripped by investors to make quick gains on the Cambridge-based company's incredibly valuable IP.
Circling back to today's news, Nvidia and Softbank are sticking to the line that the deal is the best for Arm, for competition, and for innovation in the chip business as a whole. Softbank does have an interest in letting the process play out for as long as possible, with Nvidia shares (part of the deal) having doubled in value since the ink dried on the $40 billion agreement. Nvidia shares have seen a recent dip, but the overall trend remains encouraging and if the deal were to close in several months from now Softbank could realize tens of billions more value from the sale.
The Impetus Behind Nvidia Israel CPU R&D Investments
A week ago, Tom's Hardware reported that Nvidia is hiring "hundreds" of employees in Israel. Nvidia intends to build a Next-Gen CPU Development Group in the increasingly tech-orientated nation. In addition, Israel is the home of Nvidia's $7 billion 2020 acquisition, Mellanox, as well as the site of seven Nvidia research facilities staffed by approximately 2,800 people.
Last week we heard that the hundreds of new employees would be broadly distributed in CPU hardware, software, and architecture disciplines. However, today's report casts a different light on the plans for Nvidia to expand its R&D in CPUs. It might mean the new R&D folks are not necessarily looking at the Arm architecture for Nvidia's next CPU, for example.
Clearly, Nvidia wants to own all the expensive IPs for making computers, from the CPU, GPU, and networking IPs, as well as the software. If the Arm acquisition doesn't go ahead, Nvidia will surely have plan B lined up — if it isn't in action already.