Is Nvidia ready to give up the $40 billion deal to buy Arm?

Just weeks after Nvidia (Nasdaq: NVDA) filed a 29-page filing defending its acquisition of semiconductor company Arm from SoftBank, sources told Bloomberg that the company was preparing to abandon the $40 billion deal.

Bloomberg reported that Nvidia has told partners that it does not expect the deal to be completed. Conversely, according to people familiar with the matter, SoftBank appears to be continuing to prepare for Arm's initial public offering (IPO). Arm had previously considered an IPO, but ultimately decided that the acquisition would give the company better expansion and investment capabilities.

According to Nvidia, SoftBank First proposed the deal to the chipmaker. After reaching a deal, Nvidia encountered several obstacles, including a lawsuit filed by the U.S. Federal Trade Commission and an investigation by the EU's antitrust regulator, who feared the deal could drive up prices and limit competition in the sector.

Earlier this month, Nvidia filed a lengthy filing defending the acquisition, saying the acquisition of Arm would give Nvidia the resources to create new intellectual property to compete with Intel's famous x86 microprocessor, a miniature electronic device with the ability to perform the functions of a digital computer's central processing unit.

Nvidia said it will continue to support x86 and partner with Intel, but with this acquisition, NVIDIA can provide customers with more choice by developing a "world-class ecosystem" that will be a viable x86 alternative. Nvidia called the deal a "unique and once-in-a-lifetime opportunity" for Arm and said the combined company would have entirely new capabilities to greatly improve research and development capabilities. This has decentralized the CPU market, which has been dominated by international x86 CPUs, and accelerated Arm's development in areas such as mobile and The Internet of Things.

Arm's popularity has soared recently, gaining supporters such as Apple (Nasdaq: AAPL), but its rival Intel (Nasdaq: INTC) has developed strategies to hinder competition, such as easing its previously repressive x86 license.

After the news broke, Nvidia's shares fell 3% on Tuesday afternoon to $225.59 per share. SoftBank shares fell 4 percent to $22.12 per share.