Nvidia's $40B Arm Deals Faces FTC Roadblock: All You Need To Know

The Federal Trade Commission has sued to block U.S. chip supplier NVIDIA Corp's NVDA $40 billion acquisition of the SoftBank Group Corp SFTBY SFTBF backed U.K. chip design provider Arm. 

• FTC Bureau of Competition Director Holly Vedova said the proposed vertical deal could offer the influential chipmaker control over the computing technology and designs relied on by the rivals for innovative next-generation technologies, including those used to run data centers and driver-assistance systems in cars.
• The proposed deal would distort Arm's chip market incentives and undermine Nvidia's rivals. 
• All major chipmakers are Arm customers, and the companies, including Qualcomm Inc QCOM, Intel Corp INTC, and Advanced Micro Devices Inc AMD, sell chips that compete directly with products from Nvidia, Bloomberg reports.
• Apple Inc AAPL and Amazon.com Inc AMZN also utilize Arm technology for smartphones. The E.U. and the U.K. are already probing the deal.
• Analyst Opinions: Citi analyst Atif Malik lowered his deal probability to 5% from 30% after the FTC move. 
• Malik sees a potential path forward if Nvidia can present remedies that, among other options, might include creating a "Chinese Wall" between the R&D engine and Arm business contracts to ease the antitrust regulatory concerns. He keeps a Buy rating on Nvidia shares with a $350 price target (8.9% upside).
• "We have said for some time that it is unlikely this deal gets approved," said Matt Bryson, an analyst at Wedbush Securities. "We also believe the investment community is largely of the same opinion."
• Nvidia, which made its name in graphics processors for video games, now sells chips for everything from artificial intelligence to cryptocurrency mining. "This combo just would have been too much," said Chris Rolland, an analyst at Susquehanna Investment Group.
• Price Action: NVDA shares traded lower by 0.86% at $318.50 in the premarket session on the last check Friday.