Nvidia’s deal could be a real challenge for Intel and AMD for Arm, but is likely to face opposition



Nvidia Corp’s bold $ 40 billion deal to buy chip designer Arm Holdings could pose a major new threat to both Intel Corp and Advanced Micro Devices Inc. in the data center market, but will face two major hurdles along the way. .

Nvidia nvda,
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NVDA,
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NVDA,
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Best known for its graphics chips for gamers and servers – said that on Sunday it had reached an agreement with SoftBank Group Corp 9984.
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To purchase Arm Holdings plc. A $ 40 billion deal in a mix of cash, stock and potential future payments. Softbank bought the Cambridge, UK-based chip designer for more than $ 32 billion in 2017, but has been pressured by activist investor Elliott Management to sell off some of its assets, after its balance sheet and tech holdings portfolio fell heavily There was a decline. WeWork has one of its large investments, in value.

The deal could make Nvidia a strong direct competitor to Intel, which passed in market value for the first time earlier this year, and AMD, the two leading developers of microprocessors for PCs and servers based on Intel’s x86 architecture. Until now, Nvidia and its graphics chips have been praising their microprocessor families, but are competitive with their graphics chips. A push into microprocessors, with Nvidia’s ownership of the arm and its separate RISC (reduced instruction set computing) architecture, may be the first real challenge for its Silicon Valley neighbors. But Nvidia may face challenges from both regulators and competitors to get there.

Eric Ross, an analyst at Cascade Securities, said in a note that the deal “should be the most concerned at Intel, if the company”, as Nvidia will take a central processing unit (CPU) core for the data center, is in that market Graphics is built with chips.

“Additional creative designs incorporating the best of CPUs and GPUs in a processor can be beneficial,” he said, although many government regulators certainly have to face – not only from the US, but also from China.

Beyond regulatory hurdles, Nvidia may face some resentment from arm licensors, many of whom are Nvidia competitors. Arm is a unique chip company, as it only licenses its designs to the swaths of many companies, where they are used in low power consumption devices such as smartphones, tablets and wearables.

Arm has more than 500 licensees for its technology, and they can twist licensee designs and customize them for their own products and customers. The largest branch customers are Huawei Technologies, Qualcomm Inc. QCOM,
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Broadcom Inc. AVGO,
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, Apple Inc. AAPL,
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Samsung Electronics 005930,
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, Intc corp INTC,
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And AMD AMD,
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MarketWatch reached out to several of the largest branch licensees for comments, but so far, only Intel has responded, saying that it declined to comment.

Bernstein research analyst Stacey Rasgon asked Nvidia executives for more information on how they would put the open-licensee model in the companies’ conference call on Monday morning. Intimated, but not directly stated, his question concerned that some customers may not be owned by a competitor for the arm.

Nvidia co-founder and chief executive Jensen Huang responded, “We will protect the privacy information of all our customers the way we do today and the way Arm does today.” “Neither do we really know what customers are doing with our technology. And yes, we work with every company in the world, and this is how Arm works with every computer company in the world. We protect everyone’s privacy. “

Rasgon said in a note to customers that if Nvidia could shut it down, “Nvidia’s dominance would be extended in almost every important compute domain, with undeniable strategic value, allowing the company to have potential in this path through ownership.” Opportunity to differentiate that if they were not simple licensees [of Arm]. “

Evercore ISI Securities said Nvidia would help expand arm architecture even more in server and networking infrastructure and embedded artificial-intelligence markets, but analysts were concerned about regulatory approval.

Nvidia executives told analysts on a conference call that they expected regulatory approval for about 18 months, which is higher than the average approval cycle. In response to a question about China, Huang said the issue for export control is not the ownership of Arm’s intellectual property, but the origin of IP, which was created in the United Kingdom.

Huang said, “The Arm of IP originated in Cambridge in three decades.” “And so the amount of code, the amount of innovation is measured in thousands of human years. And so the IP will essentially be in the UK, the arm will be headquartered in the UK ”

Even with that optimism, Rasagan noted that the branch’s licensees were likely to be “up in arms”.

“It appears that Nvidia’s ownership will erode the current value of the asset,” he said.

Huang & Co. faces one of Nvidia’s toughest battles so far, but if they win over regulators and arm customers, the company will have Silicon Valley’s new Chip King over a pair of long-time rivals There is a chance of

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