Nvidia jumps on US$40 billion chip deal; analysts expect tough scrutiny

Nvidia jumps on US$40 billion chip deal; analysts expect tough scrutiny

Shares of Nvidia Corp rose 6per cent on Monday after it announced a US$40 billion deal to buy UK-based chip designer Arm from Japan's SoftBank Group Corp that, if completed, would be the chip industry's biggest ever merger.

FILE PHOTO: Nvidia at the E3 2017 Electronic Entertainment Expo in Los Angeles
FILE PHOTO: The Nvidia booth is shown at the E3 2017 Electronic Entertainment Expo in Los Angeles, California, U.S., June 13, 2017. REUTERS/ Mike Blake

REUTERS: Shares of Nvidia Corp rose 6per cent on Monday after it announced a US$40 billion deal to buy UK-based chip designer Arm from Japan's SoftBank Group Corp that, if completed, would be the chip industry's biggest ever merger.

The deal vaults Nvidia into the very top echelon of the world's chip suppliers and its stock, which has more than doubled this year, gained 5.8per cent to US$514.9 in early trading.

Shares in SoftBank, under pressure for months after a torrid year dominated by the troubles of its WeWork shared office venture, jumped 10per cent.

A host of analysts were quick to flag significant regulatory hurdles including from China for the buyout, which is seen to have big implications for the global semiconductor landscape.

"Although Nvidia had success in attaining regulatory approval from China for its Mellanox acquisition earlier in 2020, the magnitude and significance of this potential deal will undergo heightened scrutiny," Morningstar analyst Abhinav Davuluri wrote.

The sale puts a vital supplier to Apple Inc and others across the industry under the control of a single player and faces likely pushback from regulators and rivals to Nvidia, the biggest U.S. chip company by market capitalisation.

While analysts pointed out that the deal may pose a significant threat to Nvidia's data center peers Intel Corp and Advanced Micro Devices Inc , shares of the rival chip firms were little moved premarket.

(Reporting by Munsif Vengattil and Ayanti Bera in Bengaluru; Editing by Shailesh Kuber)

Source: Reuters

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