Nvidia (NVDA) shares slipped lower Tuesday after it formally called-off its planned $40 billion takeover of chipmaker Arm Holdings from Japan's SoftBank Group.
Softbank, which purchased Arm for around $32 billion in 2016, is now looking to list the chip designing business following a series of push-backs on the sale to Nvidia from regulators on both sides of the Atlantic, as well as in China, over the impact of the deal on global competition.
Nvidia had called the Arm deal a "great opportunity for the industry" on its third quarter earnings call in November, but noted that it was being probed by the China Antitrust Authority as well as regulators in the U.S. and Europe.
Britain's Competition and Markets Authority raised 'serious competition concerns', and called for an in-depth investigation into the $40 billion deal in August, while the U.S. Federal Trade Commission sued to block the deal in early December, alleging that the combined firm" would have the means and incentive to stifle innovative next-generation technologies, including those used to run datacenters and driver-assistance systems in cars."
Cancelling the deal will cost it $1.25 billion in pre-paid breakup fees, the company said Tuesday.
“Arm has a bright future, and we’ll continue to support them as a proud licensee for decades to come,” said CEO Jensen Huang. “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," he added. "I expect Arm to be the most important CPU architecture of the next decade.”
Nvidia shares were marked 0.4% lower in late morning trading Tuesday to change hands at $246.30 each.
Nvidia posted stronger-than-expected third quarter earnings in November and both gave an upbeat near-term outlook and a bullish take on developing opportunities in the so-called 'metaverse'.
Nvidia beat the Street by 6 cents with a third quarter bottom line of $1.17 per share, powered by a 50% year-on-year surge in overall revenues, to $7.1 billion, with stronger-than-expected tallies for both its gaming and data center divisions.
Looking into the final months of the 2021, Nvidia forecast revenues in the range of $7.2 billion, plus or minus 2%, while adding that its new Omniverse set of augmented reality software tools -- which support designers in the burgeoning 'metaverse' -- will eventually draw $1,000 a year from 40 million creators.
Nvidia will post its fourth quarter earnings on February 16.
