Nvidia's acquisition of ARM failed, which may not be a bad thing

According to reports, SoftBank's deal to sell ARM to Nvidia for $66 billion has failed, and SoftBank will receive $1.25 billion in break-up fees. Previously, U.S., U.K. and EU regulators expressed serious concerns about the impact of the deal on the competitive landscape of the global semiconductor industry. SoftBank seeks to spin off ARM through an IPO by the end of the year.

Previously, Bank of America had said that Nvidia's suspension of the acquisition of ARM was good for the company. Its analyst Vivek Arya explained that Nvidia does not need to own ARM to use its technology to expand in data centers, and THAT ARM's smartphone sales are "highly diluted" and not worth $55 billion to $60 billion in cash and stock value.

Finally, even if the deal is completed, it will be an "ongoing" source of complex royalty negotiations, including with Nvidia's rivals.

In a note to clients, Arya wrote: "Overall, we believe Nvidia can shift cash/equity to other growth areas such as AI, metaversity, gaming, automotive, and enterprise AI."

So giving up the acquisition of ARM, is it a good thing for NVIDIA?

Nvidia has reportedly been planning to buy ARM for $40 billion, and while the deal, in Nvidia's view, could lead to long-term growth to complement the company's existing offerings, one of the biggest risks it faces is that it will be difficult to get regulatory approval. Even assuming that Nvidia does succeed in acquiring ARM, regulators may force the company to divest, which will seriously weaken the company, so it may be better for Nvidia to abandon the acquisition of ARM.

In addition, while the acquisition of ARM may help Nvidia solve some of its problems, with Nvidia's existing funds, it is entirely possible to make other acquisitions or reinvest in itself. Therefore, the acquisition of ARM is not something that NVIDIA must achieve.

As of the close of U.S. stocks on Feb. 7, NVIDIA was up 1.68 percent at $247.28.