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Why Nvidia Stock Slipped Wednesday

By Rich Smith – Sep 8, 2021 at 4:07PM

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Europe is next in line to take a look at the Nvidia-Arm deal.

What happened

Shares of semiconductor giant Nvidia (NVDA -0.98%) dropped as much as 3% in early trading on Wednesday before recovering. As of 3:50 p.m. EDT, it now looks likely to close the day down only 1.5%.

So what

As Reuters reported this morning, Nvidia has officially applied to the European Commission for antimonopoly approval of its $40 billion deal to acquire British chip design company Arm Holdings from its current owner Softbank Group (SFTB.Y -0.18%). Asking permission isn't the same thing as receiving it, however, and as Reuters points out, not only is the U.S. Federal Trade Commission looking into antimonopoly aspects of the deal, but competition authorities in the U.K. are as well -- and now the EC makes three.  

Nvidia says it is "working through the regulatory process and we look forward to engaging with the European Commission to address any concerns they may have" -- but they may live to regret saying that. As Reuters points out, in the event the EC does not simply approve the deal, it might launch an investigation that could drag out and delay the merger by as much as four months.  

Wall painting depicts a large yellow fish eating a smaller yellow fish.

Image source: Getty Images.

Now what

And even then, success won't be guaranteed. The EC could demand concessions from Nvidia, such as selling off pieces of its own or Arm's business, or giving assurances that Arm will continue to license its technology to rival semiconductor companies on fair terms -- or the EC could simply scotch the whole deal, and deny Nvidia the permission it seeks.

As the reality of the ordeal Nvidia is facing becomes more obvious to Nvidia shareholders, it seems to be making them a little bit nervous today. On the plus side, though, if the EC does prevent this merger from going through, well, at least Nvidia will get to keep its $40 billion. And to be perfectly honest, with revenue up 68% last quarter, I have to say that Nvidia seems to be growing just fine all on its own.

Rich Smith has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Nvidia. The Motley Fool recommends Softbank Group. The Motley Fool has a disclosure policy.

Stocks Mentioned

Nvidia Stock Quote
Nvidia
NVDA
$170.01 (-0.98%) $-1.68
SoftBank Group Corp. Stock Quote
SoftBank Group Corp.
SFTB.Y
$22.38 (-0.18%) $0.04

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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