The Federal Trade Commission has filed a lawsuit to block the acquisition by US chip supplier Nvidia Corp. for $ 40 billion from British chip supplier Arm, backed by SoftBank Group Corp.
FTC Competition Bureau Director Holly Vedova said the proposed vertical deal could offer the influential chipmaker control over the computing technology and designs that rivals rely on for next-generation innovative technologies, including those used to power data centers and systems. assistance to the driver in cars. …
The proposed deal will distort Arm’s incentives in the chip market and undermine Nvidia’s competitors.
All major chip manufacturers are Arm customers, and companies including Qualcomm Inc., Intel Corp. and Advanced Micro Devices Inc., sell chips that directly compete with Nvidia’s products, Bloomberg reported.
Apple Inc. and Amazon.com Inc. also use Arm technology for smartphones. The EU and UK are already investigating the deal.
Citi analyst Atif Malik has reduced the likelihood of his deal from 30 percent to 5 percent after the Federal Trade Commission’s decision.
Malik sees a potential way forward if Nvidia can offer remedies, which could include, among other things, the creation of a China wall between R&D Engine and Arm’s business contracts to ease antitrust concerns. It maintains a Buy rating on Nvidia with a target price of $ 350 (8.9% upside).
“We have stated for some time that this deal is unlikely to be approved,” said Matt Bryson, an analyst at Wedbush Securities. “We also believe that the investment community is largely of the same opinion.”
Nvidia, which has made a name for itself in GPUs for video games, now sells chips for everything from artificial intelligence to cryptocurrency mining. “This combination would be too big,” said Chris Rolland, an analyst at Susquehanna Investment Group.
Nvidia shares closed 4.46 percent lower at $ 306.93 on Friday.
Author: Anusuya Lahiri
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