NVIDIA Corporation (NASDAQ: NVDA) has announced that it has decided to acquire Arm Ltd. from SoftBank Inc. for about $40 billion in stock and cash deal. This deal is considered to be the first-ever deal of this kind in the semi-conductor industry but Nvidia Inc has received a strong backlash from its rival. Nvidia deal with SoftBank would put Arm Ltd under the control of a US-based firm in the middle of a battle between the US and China.
Arm Ltd. has a strong reach as a supplier of designs and intellectual property to most of the global semiconductor industry. It is considered to be the major supplier of its technology to companies such as Intel Corp, Samsung Electronics Co Ltd, and Qualcomm Inc who increasingly compete with Nvidia. Nvidia Corporation is anticipated to close the deal in 18 months after receiving regulatory approval but there are speculations that the deal will be delayed.
ARK Invest Analyst James Wang said that this deal required approval from four countries the UK, the US, China, and Japan so there are 50/50 chances that the deal will be delayed. The analyst said that this is a complicated deal and it is too early to say that this will be completed or not. Mark Lipacis maintained a Buy rating for Nivida as he raised the price target from $570 to $680.
Geoff Blaber, vice president of research for the Americas with CCS Insights revealed that this deal will receive a lot of obstacles and will encounter huge criticism from the customers of Arm Ltd. Nvidia Chief Executive Jensen Huang and Arm Chief Executive Simon Segars made a very interesting point that because the company is based in the UK, it is free from US trade barriers and regulations. Nvidia will maintain the UK headquarter of Arm Ltd.
Shares of Nvidia Corporation (NASDAQ: NVDA) soared 5.82% as it gained +28.31 during the trading session of Monday. NVDA share price went from a low point around $169.32 to briefly over $589.07 in the past 52 weeks, though shares have since pulled back to $514.89. Nvidia Corporation’s market cap has remained high, hitting $321.53 billion at the time of writing. Looking at its liquidity, it has a current ratio of 6.10.
Nvidia said that the Arm will continue to work as a neutral supplier after the deal and it will not interfere in any Arm’s Licensing efforts. But the deal has garnered a huge criticism. One of the Chinese chip executives said that it is hard to give services in China if Arm had an American Parent company. South-Korean chip officials said that after this deal Arm could increase the licensing fees for the competitors.
The combination of Nvidia and Arm Ltd will reshape the semiconductor industry in the coming years. After this deal, Nvidia will be able to gain the ability to own the whole chip stack, across mobile phones, computers, and cloud-computing data centers.
