Khan Claims Blocking Nvidia-Arm Deal Proves Stronger FTC, Raises Concerns

Chair of the Federal Trade Commission Lina Khan mentioned the rising Nvidia stock price and Arm as an illustration of how preventing mergers might spur more creative thinking.

Speaking on Tuesday at a conference hosted by Y Combinator and Bloomberg, Khan said that the cancellation of the $40 billion merger in 2022 because of "significant regulatory challenges" pushed both businesses to innovate and develop new products.

Khan's statements at the conference indicate that both she and the Federal Trade Commission (FTC) view the thwarted Nvidia deal, described by Khan as "the largest semiconductor chip merger in history," as a demonstration of effective antitrust action. They believe such actions can prevent monopolistic behaviors without stifling companies' ability to pursue financial success or adopt new technologies like artificial intelligence.

Khan emphasized that the outcomes for both companies subsequent to the intervention illustrate how organic growth and competition can drive firms to innovate further, ultimately benefiting both the business sector and the public at large. She pointed to evidence from the companies' stock prices to support her argument.

Failed Nvidia-Arm Merger and its Aftermath

Nvidia revealed intentions to buy Arm for $40 billion in cash and equity in September 2020. Both businesses celebrated the agreement as a means of becoming the leading computer enterprise for the "AI era."

Regulators in the US, Europe, and Asia, however, swiftly objected to the transaction. Companies like Apple, Google, and Qualcomm employ Arm's instruction set architecture, which is its fundamental technology, to create CPUs. Arm is frequently referred to as a "neutral supplier" since it doesn't engage in rivalry with its clients.

Concerns were raised by those businesses and authorities that Nvidia would get access to Arm's architecture and so block access to a crucial component required for the production of Arm chips. Nvidia said that it will continue to support Arm by investing in the firm and allowing other businesses to utilize Arm's chip designs under the terms of the license.

After the FTC filed a lawsuit in late 2021 to stop the merger, the agreement fell through less than three months later as a result of pressure and further regulatory difficulties.

Since the cancellation of the acquisition, Nvidia's stock has surged dramatically as the firm has taken the lead in AI technology. Due mostly to the success of its AI processors for servers like the A100 and H100, Nvidia's valuation has almost quadrupled. At just around $2 trillion in value today, it ranks third among American companies in terms of value.

Since the firm went public in August 2023, Arm stock has more than doubled, despite SoftBank still owning 90% of the company's shares. Its share price has increased as a result of investors' hopes that its technology will be crucial for creating and implementing AI software.

As Khan pointed out, investors have given Arm a high earnings multiple, indicating that they anticipate the firm will develop rapidly in the future. As of right now, Arm is valued at more than $143 billion.