Nvidia in Talks to Purchase Arm Holdings

September 14, 2020
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Nvidia Corp. (NASDAQ: NVDA) is reportedly in late-stage talks to purchase Arm Holdings, one of the most important semiconductor companies in the world. Nvidia is a manufacturer of consumer and professional graphics cards, SoC (System on a Chip) microprocessors, and specialized server and supercomputer processors.

Arm Holdings is a British microprocessor designer that dominates the smartphone market. It owns a large patent portfolio and licenses its technology to companies like Nvidia, Samsung, Apple, and Microsoft. Arm-based processors can be found in devices ranging from the iPhone and iPad to Samsung’s Note and Galaxy phones. Virtually every smartphone in the world today uses chips based on licensed Arm designs. Arm patents are also used in electric vehicles and a growing number of smart devices.

Industry sources claim that Nvidia is close to finalizing a deal to purchase Arm Holdings for $40 billion.

Deal Could be Announced this Week

According to a Reuters news report, Nvidia and Arm could finalize the deal as early as this week. It is expected that Nvidia will offer a combination of cash and stock with a value of £31.26 billion ($40 billion).

Arm is owned by SoftBank Group Corp., a Japanese company that is currently restructuring after heavy losses during the Coronavirus Pandemic. Offloading Arm would generate a significant profit for SoftBank. It purchased the British company for $32 billion in 2016.

Huge Potential Benefits for Nvidia

Acquiring Arm would be a win for Nvidia. The company is currently leading the graphics card market but could grow its business with free access to Arm’s patents. Intellectual property could be incorporated into Nvidia’s existing hardware lines to enhance performance and versatility.

Even if the deal is confirmed, there will still be regulatory hurdles to overcome. Because Arm licenses to so many of Nvidia’s competitors, those companies will want safeguards in place to prevent anti-competitive practices. Antitrust questions could be raised with the U.S. Department of Justice Antitrust Division, the Federal Trade Commission, and similar regulators in Europe and other key markets.

Nvidia’s stock is currently up 106.79% in the year so far. Acquiring Arm could create more confidence in this powerful growth pick. Investors should monitor the news cycle closely over the coming days for more details on what could be the tech industry’s biggest deal this year.

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