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FTC sues Nvidia to block $40 billion ARM acquisition

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Yahoo Finance's Dan Howley explains why Nvidia's move to acquire ARM is likely dead as the Federal Trade Commission sues to block the deal from going through.

Video Transcript

[MUSIC PLAYING]

ZACK GUZMAN: Well, having to face the hurdle of approval from regulators in Europe, China, and the US, not a lot of people were betting on the Nvidia acquisition of ARM in the chip space-- a $40 billion acquisition mind you-- would actually go through. And today, the FTC suing to block that acquisition on the grounds of antitrust concerns. All but putting that question behind us but there are some who still think that it could go through. And for more on that, I bring on Yahoo Finance's Dan Howley. And Howley, I'm not sure which camp you'd be in here but clearly, not exactly optimism being thrown in the way of this deal getting done now.

DAN HOWLEY: Yeah, this looks like the final nail in the coffin, Zack. Well, you know, obviously, it was a long shot from the get-go, that $40 billion acquisition. This is what the FTC had to say when it filed its suit, it said, "The FTC is suing to block the largest semiconductor chip merger in history to prevent a chip conglomerate from stifling the innovation pipeline for next-generation technologies. This proposed deal would distort ARM's incentives in chip markets and allow the combined firm to unfairly undermine Nvidia's rivals."

Now, ARM is basically considered a neutral Switzerland in the chip market, they offer their designs and software to essentially everybody, whether that's Nvidia, Microsoft, Intel, Qualcomm, essentially anybody that you can think of that makes chips. Apple's own chips, they are ARM-based. So in response, Nvidia had this to say, "As we move into this next step with the FTC process, we will continue to work to demonstrate that this transaction will benefit the industry and promote competition." And we actually had Nvidia's CEO Jensen Huang on a few weeks back and this is what he had to say then about the proposed acquisition.

JENSEN HUANG: The benefit of ARM being part of Nvidia is that we could accelerate their R&D scale. ARM as you know is quite successful in mobile devices but we could help them be much more successful in all of the other areas of computing. And so there are wonderful benefits in our ability to help them turbocharge their R&D scale. However, as we are independent today you could see that Nvidia continues to do really terrific things, and wherever we could expand the reach of ARM, we do.

DAN HOWLEY: See obviously, Jensen Huang there, the CEO of Nvidia still hopeful for that ARM deal back then. But he may be having different thoughts this morning following that FTC suit filed yesterday, Zack.

ZACK GUZMAN: All right, Dan Howley, bringing us the latest there on the chip front. Appreciate that.

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