Beijing Could Stand in Way of Nvidia’s purchase of Arm

Regulators in China could prove a major barrier in Nvidia’s (NASDAQ:NVDA) attempt to buy U.K. chipmaker Arm from SoftBank for $40 billion, according to analysts.

The mega-deal, which would create the largest chip company in the West by market value and global reach, was announced at the start of September. But it is far from being home and dry, with multiple regulators able to weigh in including China’s Ministry of Commerce (MOFCOM) and China’s State Administration for Market Regulation (SAMR).

It wouldn’t be the first time Chinese regulators have prevented a U.S. chip firm from buying a European player. In 2018, SAMR blocked Qualcomm’s (NASDAQ:QCOM) attempt to buy Dutch chipmaker NXP.

One expert believes Nvidia will likely try to assure Chinese regulators by saying Arm’s technology is British and that future investment in the U.K. will ensure it stays that way. But it’s not that straight forward.

MOFCOM, SAMR and the Chinese embassy in London did not immediately respond to CNBC’s request for comment. Nvidia declined to comment while a spokesperson for Arm said: “Nvidia, Arm and SoftBank are confident that all regulatory approvals will be secured.”

Arm is widely regarded as the jewel in the crown of the British tech industry. Its energy-efficient chip architectures are used in 95% of the world’s smartphones and 95% of the chips designed in China.

NVDA shares ballooned $5.48, or 1%, to $564.28