The UK may block the takeover of British chip developer Arm Holdings by American NVIDIA due to potential national security risks. Bloomberg reports this concerning its source.
Recall that NVIDIA agreed to purchase Arm Holdings from the Japanese corporation SoftBank Group for $ 40 billion in September 2020. The deal should be the largest in the semiconductor industry and significantly strengthen NVIDIA’s position as the world’s leading chipmaker.
However, immediately after the news was announced, it was clear that the deal would not be easy, as it requires regulatory approval from the UK, China, the European Union, and the United States. Moreover, many other technology giants use ARM technologies, including American ones – Apple, Intel, AMD, Qualcomm, etc.
NVIDIA has assured that Arm Holdings will continue to use its licensing model while maintaining customers; other companies will likely object to the deal and demand assurances that the new owner will continue to provide everyone with equal access to ARM technology.
Therefore, even though NVIDIA’s management has repeatedly stated its confidence that it will eventually complete the deal, investors still doubt this.
Note that the information of the agency’s source looks somewhat strange – it is not entirely clear how the transfer of Arm Holdings from the ownership of a Japanese company to the right of an American company could affect the national security of Britain. In addition, the source noted that the decision is not final, and approval of the deal may still be issued “if certain conditions.” Therefore, the market reaction to this news was generally neutral.
As for NVIDIA’s results for 2 FNs ending in July (reports will be on August 18), we forecast the company’s quarterly revenue rose 64% to $ 6.35bn on better sales across all segments, while earnings per share could jump 85% to $ 1.02.
Our fair value estimate for NVIDIA is currently under review. We plan to update the company’s valuation model and target price of its shares and a recommendation on them shortly.
