The Nvidia-Arm Deal is Dead; Softbank to IPO UK Chip Designer

The Nvidia dream of owning one of the world's most disruptive chip designers is over. Japanese conglomerate SoftBank, holders of UK-based chip design powerhouse Arm whose chips power most of modern day's smart devices, has announced that the company is going the Initial Public Offering (IPO) route. Nvidia has in the meantime confirmed the same ending, with both companies citing "significant regulatory challenges" as cause. It's a modern-day death by a thousand cuts.

"Arm has a bright future, and we’ll continue to support them as a proud licensee for decades to come," said Nvidia CEO Jensen Huang via a Business Wire press release. "Arm is at the center of the important dynamics in computing. Though we won’t be one company, we will partner closely with Arm. The significant investments that Masa has made have positioned Arm to expand the reach of the Arm CPU beyond client computing to supercomputing, cloud, AI and robotics. I expect Arm to be the most important CPU architecture of the next decade."

Announced in September 2020, the planned Nvidia acquisition of Arm from SoftBank was, at the time, valued as a $40 billion deal - one of the most significant acquisitions ever in the technology space. However, a company with the market clout of Nvidia acquiring a wholesale Instruction Set Architecture (ISA) and chip designer quickly sparked pushbacks from some industry players - most notably Arm licensee juggernauts such as Qualcomm, Apple and Samsung. 

Support for the acquisition amongst certain licensees seemed to be insufficient to allay fears of possible anti-competitive practices that might surge from the Nvidia acquisition. But the deal faced close regulatory scrutiny from the get go, as regulatory bodies time and again signaled their first impressions on the deal - the Federal Trade Comission (FTC), for one, sued to block it after calling it an "illegal vertical merger". The UK government also signaled its worries at the acquisition attempt, despite Nvidia also announcing a sizeable investment to expand ARM's R&D presence in Cambridge, UK with a new AI research and education center - and an ARM/Nvidia-powered AI supercomputer. Even Nvidia CEO Jensen Huang must've seen the writing on the wall at some point.

The world waits for no-one, however, and Arm is quickly moving on towards the preparatory stages for its IPO, which had already been waved as an alternative to the Nvidia purchase. Arm aims to complete the IPO within this fiscal year (which ends on march 32st, 2023). The failure isn't without its proverbial rolling head, however; the deal’s failure brought a management shake-up at Arm, with chief executive Simon Segars being replaced by Rene Haas. Interestingly, Rene Haas was the head of the company’s intellectual property unit.

As for Nvidia, the company is losing the $1.25 billion deposit it agreed with SoftBank, irrespective if the deal went through or not. The company really was carrying all the weight and risk on this transaction, which paired with Jensen Huang's words, shows just how much Nvidia wanted this deal to go through.  But considering Nvidia's stock performance in the meantime, and the fact that part of the acquisition was to be done through the company's shares, Nvidia would end up paying around $66 billion. Nvidia either just lost $1.25 billion or saved $64.75 billion. In business as in life, it's all a matter of perspective.