The Federal Trade Commission has been sued by graphics card giant Nvidia NVDA to block its proposed acquisition of Arm.
The FTC is suing to block the largest semiconductor chip merger in history to prevent a chip conglomerate from stifling the innovation pipeline for next-generation technologies, FTC Bureau of Competition Director Holly Vedova said in a release.
The proposed deal would cause Arm's incentives to be distorted in chip markets and allow the combined firm to unfairly undermine Nvidia's rivals, Vedova said.
An Nvidia spokeswoman said the company will continue to work to demonstrate that this transaction will benefit the industry and promote competition. The stock of the company was up a bit after the news.
Nvidia plans to acquire U.K based Arm from SoftBank in September 2020 in a deal valued at $40 billion. At the time, Nvidia CEO Jensen Huang said the move would have huge benefits for both companies, customers, and the industry. The deal has been criticised by both international regulators and industry heavyweights. The Competition and Markets Authority of the U.K. is in the midst of an in-depth investigation of the acquisition to determine its potential antitrust and national security concerns.
In the tech industry, the arm is considered a neutral Switzerland. It provides chip designs and software to a large number of big names, including Qualcomm QCOM Microsoft MSFT Google GOOG, GOOGL Intel, Samsung and Nvidia.
The FTC may think the Nvidia deal would no longer allow Arm to act as a neutral third party, and could cut off competing companies from Arm's all-important designs. Google, Microsoft, and Qualcomm have lodged complaints about the potential deal with antitrust regulators, according to Bloomberg. Nvidia, for its part, said it would maintain Arm s neutrality.
In an interview with Yahoo Finance, Huang said that Nvidia could help Arm's R&D capabilities.
He said that Arm could speed up the R&D scale because of the fact that it is part of Nvidia. Arm is quite successful in mobile devices. We could help them be more successful in all other areas of computing. An administrative trial is scheduled for May 10, 2021.
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