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Is NVIDIA's Acquisition of Arm Holdings Doomed?

By Danny Vena, Dan Caplinger, and Jason Hall - Mar 2, 2021 at 4:00PM

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A number of high-profile big tech companies are uniting against the GPU specialist's purchase of the chipmaker.

Late last year, NVIDIA (NVDA -6.18%) announced that it intended to buy mobile-chip designer Arm Holdings from SoftBank (SFTB.Y 1.21%) in a deal valued at $40 billion. The company pointed to the opportunities surrounding the Internet of Things and artificial intelligence (AI), saying the capabilities of the two processor specialists would perfectly position the company for "the age of AI." However, in the ensuing months, a number of big tech companies, including Qualcomm (QCOM -2.08%), Microsoft (MSFT -1.28%), and Google parent Alphabet (GOOGL -3.44%) (GOOG -3.22%), have come out against the deal, and the U.S. Federal Trade Commission (FTC) has launched an investigation into the acquisition.

In this clip from Motley Fool Live, recorded on Feb. 16,"The Wrap" host Jason Hall and Fool.com contributors Danny Vena and Dan Caplinger discuss whether these objections will ultimately affect the outcome of the deal.

Jason Hall: Will NVIDIA's acquisition of Arm Holdings get blown up or will it survive FTC scrutiny?

Danny Vena: I suspect it's going to be fine. Part of what we are seeing is the saber rattling that generally happens whenever you have a technology that businesses consider to be vital to their success going forward. So a lot of the big tech companies use the chips that Arm Holdings develops and actually they license the technology to be able to create [chips] themselves.

We're talking all of the usual suspects. The ones that are complaining that at least that have been reported, are Alphabet, Microsoft, and Qualcomm. But all of the big companies, you could even go further and say Apple and Intel and Amazon and Samsung all use Arm's technology.

So as a result of that, I think they just want to make sure that if this merger happens, if NVIDIA is successful in acquiring Arm Holdings that they still get the same access to the technology that they always have.

So I suspect that the Federal Trade Commission will probably just put a stipulation on the deal that says you still need to license the same technology to the same people that you're doing, that are licensing it now.

But I think it's also important to note NVIDIA has already said part of the reason that they paid such a good premium for that company is because of the revenue stream that they're getting from Arm Holdings, and that's from licensing this technology to the other tech companies. I don't think there's going to be issue. They'll stipulate that they'll have to behave in a certain way if it gets approved and it will ultimately get approved, I think.

Jason Hall: Dan Caplinger, what do you think here?

Dan Caplinger: Yeah, I don't really have anything substantial to add. I just think that when you're talking about an antitrust situation, when the people that are complaining the loudest are companies that themselves have been subject to antitrust [laughs] investigation in the past, you're probably not going to carry the day.

It's one of those where, if they'd wanted to do it, they really needed to get some smaller companies out there to say, hey, this is really going to hurt us. Nobody is going to be crying for the folks in Redmond. It's just not going to happen. Yeah, I think it goes through with, like Danny said, some stipulation or whatever, the nod to competition, but it will go through.

Jason Hall: Yeah, half a dozen mega companies walk into a restaurant say, we have a reservation for a table. What's the name? Pot and Kettle. This is certainly the case here.

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Stocks Mentioned

NVIDIA Corporation Stock Quote
NVIDIA Corporation
NVDA
$160.65 (-6.18%) $-10.59
QUALCOMM Incorporated Stock Quote
QUALCOMM Incorporated
QCOM
$127.85 (-2.08%) $-2.72
Microsoft Corporation Stock Quote
Microsoft Corporation
MSFT
$249.91 (-1.28%) $-3.23
Alphabet Inc. Stock Quote
Alphabet Inc.
GOOGL
$2,131.85 (-3.44%) $-75.83
Alphabet Inc. Stock Quote
Alphabet Inc.
GOOG
$2,143.60 (-3.22%) $-71.31
SoftBank Group Corp. Stock Quote
SoftBank Group Corp.
SFTB.Y
$20.07 (1.21%) $0.24

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