NNNvidia shares slide after report says SoftBank may give up Arm deal

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NNNvidia shares slide after report says SoftBank may give up Arm deal

Shares of Nvidia Corp. fell in Tuesday trading after a report indicated that the company is preparing to give up its planned purchase of Arm Ltd. from SoftBank Group Corp.

The semiconductor company has faced regulatory opposition to the $40 billion combination and told partners that it doesn't expect the deal will close, according to Bloomberg, which cites an unnamed source.

According to the Bloomberg report, SoftBank SFTBY, 9984, is considering turning Arm public through an initial public offering if the deal doesn't happen.

The shares of Nvidia NVDA fell by nearly 5% in Tuesday morning trading.

An Nvidia spokeswoman said that the transaction provides an opportunity to accelerate Arm and increase competition and innovation and that we continue to hold the views expressed in our latest regulatory filings.

The Federal Trade Commission sued in December to block Nvidia's proposed Arm takeover, and the U.K. opened an investigation into the national-security impacts of the deal earlier in 2021.

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After the Bloomberg report, Bernstein analyst Stacy Rasgon wrote that he doubted investors would be surprised if the deal fell through due to the pushback from regulators and customers.

He said that it feels safe to say that virtually no one in the investment community has expected it to close anyway.

Rasgon said that while he thought Arm could have been a wonderful asset for Nvidia, he doesn't think that the company needs Arm for success.

The deal was intended to help create and drive a broader ecosystem for Arm, particularly in the datacenter, NVDA presumably can and will continue their efforts here, though it is possible that such efforts could have been accelerated by owning the asset, he wrote.

Shares of Nvidia are down 3.7% on a three month basis, but up 63.3% on a 12 month basis. The S&P 500 SPX has slipped 5.7% over the past three months, but has risen 11.7% on a 12 month basis.