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Nvidia stock falls after report says company could give up on Arm deal

Shares of Nvidia Corp. were declining in premarket trading Tuesday after a report indicated that the company is preparing to give up on its planned purchase of Arm Ltd. from SoftBank Group Corp.

The semiconductor company has faced regulatory opposition to the $40 billion combination and has told partners that it doesn’t expect that the deal will close, according to Bloomberg, which cites an unnamed source.

Additionally, SoftBank
SFTBY,
-1.33%

9984,
-5.34%

is considering turning Arm public through an initial public offering assuming that the deal doesn’t occur, per the Bloomberg report.

Shares of Nvidia
NVDA,
-0.01%

were down nearly 4% premarket.

Representatives from Nvidia didn’t immediately respond to MarketWatch’s request for comment on the report.

The Federal Trade Commission sued in December to block Nvidia’s proposed Arm takeover and the U.K. opened an investigation into the national-security impacts of the deal earlier in 2021.

Opinion: Nvidia’s deal for ARM is dead — how long until CEO Jensen Huang admits it?

Bernstein analyst Stacy Rasgon wrote following the Bloomberg report that he doubted investors would be surprised if the deal fell through given heavy pushback from regulators and customers.

“It feels safe to say that virtually no one in the investment community has expected it to close anyway,” he said in a note to clients.

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Rasgon added that while he thought Arm could have been a “wonderful” asset for Nvidia, he doesn’t think that the company needs Arm for success.

“In our opinion, the impetus for the deal was to help create and drive a broader ecosystem for Arm particularly in the datacenter; NVDA presumably can and will continue standalone their efforts here though it is possible such efforts could have been accelerated through owning the asset,” he wrote.

Shares of Nvidia are up 0.9% on a three-month basis and 71.2% on a 12-month basis. The S&P 500
SPX,
+0.28%

has dipped 3.4% over the past three months but risen 14.4% on a 12-month basis.

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