Nvidia share price falls 5% as U.S. regulator move to block Arm acquisition deal

The Nvidia share price has fallen almost 5% in early Friday trading on Wall Street after its planned acquisition of the UK-based chip designer Arm was thrown into doubt. A £62 billion deal has been agreed with Arm’s current owners Softbank but the Federal Trade Commission (FTC), the U.S. competition regulator, has move to block the agreement. Nvidia launched a legal challenge to the decision yesterday.

The FTC stated as its reason for ordering the deal to be terminated that Nvidia acquiring Arm would give the U.S. microchips giant the “means and incentive to stifle innovation” from competitors. Nvidia responded by saying it would “continue to work to demonstrate that this transaction will benefit the industry and promote competition”.

However, in filing the law suit it intends to stop the acquisition, the commission said it was of the opinion it would “unfairly undermine” Nvidia’s competition. And that by moving to block it was sending a “strong signal” that it would take a stronger position against deals it sees as having “far-reaching and damaging effects on future innovations”.

It isn’t only the U.S. competition regulator that is examining the proposed deal. The UK’s Competition and Markets Authority (CMA) also last month initiated a “phase two” investigation into the deal.

The acquisition was agreed between Nvidia and Softbank last September and the two technology giants had hoped to complete the deal by next spring. The Nvidia share price has gained almost 134% so far this year but has taken a hit today on the unwelcome development.

A number of Arm customers, semiconductor manufacturers who compete with Nvidia, have already expressed discomfort with one of the world’s most advanced chip designers presumably seeing its neutrality undermined by falling under the proposed new ownership.

Holly Vedova, the director of the FTC’s competition bureau, commented on the desire to see the deal terminated:

“Tomorrow’s technologies depend on preserving today’s competitive, cutting-edge chip markets.”