One of the New Year's biggest tech headlines was how NVIDIA's proposed to take over of
ARM crashed and burned. Haha, huge deal, because it would have made NVIDIA the world's most powerful
chip maker. So, um, why exactly did the deal fall through? Well, ARM's an incredibly important
company because it designs chips for lots of other companies. Instead of manufacturing chips
for itself, ARM licenses its designs out to other firms, many of whom compete with each other.
For example, Apple and Samsung both own ARM licenses, even though those two are at fierce
rivals in the smartphone space. Although ARM is a for-profit company like any other,
their unique position as a designer for so many players in the industry has made their neutrality
very important. You know, like, kind of like Switzerland neutrality. And there were already
some concerns back in 2016 when UK-based ARM was sold to their current owner, SoftBank,
a Japanese holding company. But because SoftBank wasn't already in the business of chip making,
the deal eventually went through with that incident. But the proposed NVIDIA acquisition
was very different. NVIDIA was already one of ARM's licensees, and it was directly competing
with other companies like AMD and Intel that also depend at least partly on ARM's designs.
Now, there are other companies that produce chips on a contract basis for its competitors.
Samsung is a good example of this, producing chips for NVIDIA. But this is more on the
manufacturing side. ARM's designs are used in so many products that if NVIDIA tried to pull a
fast one on one of its rivals and restrict access to ARM chips, there may not be a clear alternative.
Further complicating matters is how big NVIDIA already is, without even taking ARM into consideration.
Although they might be less of a household name than Intel, they're actually the second largest
chip maker in the world by market capitalization, which is the total value of all of its outstanding
shares. In fact, the market cap is actually larger than AMD and Intel's combined. Needless to say,
all this got the attention of other large tech companies, namely Microsoft, Google's parent
Alphabet, and Qualcomm, who all screamed bloody murder at the prospect of having an important
source of chip designs controlled by a direct competitor. And Apple, which uses ARM for most
of its devices, already had a frosty relationship with NVIDIA, owing in part to issues with faulty
GPUs around 2008 and 2009. Apple systems were among those affected, and NVIDIA allegedly did not
provide adequate monetary support to Apple to help fix those problems. So would Apple be happy if
they had to rely on NVIDIA for their new Apple Silicon lineup? Okay, so those are the concerns.
But who actually shut the deal down? The concerns of NVIDIA's rivals were very much taken into
consideration by regulators in several powerful countries. It's hard to get the West and China
to agree on anything these days, but regulators from the US, the UK, the EU, and China all opposed
the deal. The Western powers were primarily concerned about the buyout being anti-competitive
and possibly allowing NVIDIA to restrict access to chip designs. The UK in particular was also
worried about its own national security as ARM is based in Britain. Meanwhile, China had its own
security concerns as it wants to use ARM designs in its own chips, and didn't like the idea of having
to buy them from NVIDIA, an American company, as if ARM losing the market neutrality wasn't already
enough. So the deal was unsurprisingly blocked. But what's next for NVIDIA and ARM? Now NVIDIA is
doing just fine as a company, don't worry about them. They're worth over half a trillion dollars,
and all team green is really losing is an inroad into the mobile market. While ARM would have
been a very nice ad for NVIDIA, the deal's failure shouldn't really hurt any of their future prospects
too much. As for ARM, the reason they were interested in becoming part of NVIDIA is because
designing chips is a difficult, expensive process. And NVIDIA has, well, lots of money that could
back them. Now that the deal is off, it looks like ARM will try to raise money through an IPO
instead, initial public offering, which was SoftBank's original fundraising plan before NVIDIA
approached them. We could speculate on how that will go, but this isn't, you know, investment
advice quickie. Thanks for watching guys, like, dislike, check out some of our other videos,
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