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

Nvidia Corp.’s bold 40 40 billion deal to buy chip designer Arm Holdings Intel Corp. in the data-center market. And Advanced Micro Devices Inc. .

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– best known for its graphics chips for gamers and servers – said Sunday it has reached an agreement with Softbank Group Corp 9984,
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To buy Arm Holdings plc. Cash in a ના 40 billion deal in a mix of cash, shares and potential future payments. Softbank bought UK-based chip designer Cambridge for more than 32 32 billion in 2017, but was forced to sell some assets by executive investor Elliott Management as its balance sheet and tech holdings portfolio were hit hard by the fall in one of its largest investments, WeWork.

The deal could make Nvidia a strong direct competitor to Intel, which first passed the market value earlier this year, and AMD, the two leading developers of microprocessors for PCs and servers based on Intel’s x86 architecture. Yet, Nvidia and its graphics chips are admirable for their microprocessor families, but rival with their graphics chips. The pressure in the microprocessor, Nvidia’s Arm ownership and its various RISC (reduced suggestion set computing) architectures could be the first real challenge for its Silicon Valley neighbors. But Nvidia could face challenges from both regulators and competing customers to get there.

Eric Ross, an analyst at Cassand Securities, said in a note that if the deal happened, it would be “the most worrying company at Intel,” because Nvidia would choose a central processing unit (CPU) core for the data center. , In addition to the ado made with its graphics chips on the market.

He further said that the CPU And GPU. No. The additional structural compositions included in the best processors can be beneficial. He added, however, that the deal would definitely help the U.S. Not only that, but many government regulators from China also face obstacles.

In addition to regulatory hurdles, Nvidia may face some noise from arm license holders, many of whom are Nvidia competitors. Arm is a specialized chip company because it only licenses its design to large companies, where they are mostly used in low-power-consuming devices such as smartphones, tablets and wearables.

Arm has more than 500 licenses for its technology, and those licensees can tweak the design and customize it for their own products and customers. Huawei Technologies, Qualcomm Inc. is among the largest arm customers. Qcom,
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Broadcom Inc.
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, Apple Pal Inc. AAPL,
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Samsung Electronics 005930,
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, Intel Corp. INTC,
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Marketwatch reached out to comment on several large arm licenses, but so far, only Intel has responded by refusing to comment on it.

Bernstein research analyst Stacey Rasgone asked Nvidia officials for more details on how to keep the open-licensing model in the companies’ conference call early Monday. Reported, but not directly stated, his question raised concerns that some customers may not be comfortable with being owned by a competitor.

Reacting, Jensen Huang, co-founder and chief executive of Nvidia, said, “We will protect the privacy of our customers today and protect what we do.” “Neither of us really knows what customers are doing with our technology. And of course, we work with every company in the world, and Arm works with every computer company in the world. We protect everyone’s privacy. ”

In a note to customers, Rasgone said that if Nvidia could pull it off, “Nvidia’s dominance would be extended to virtually every important computing domain with undeniable strategic value, allowing the company to potentially differentiate in that way through ownership.” If they had a simple license [of Arm]”

Evercore ISI Securities said it would help expand the Nvidia arm architecture embedded in the service and networking infrastructure and artificial-intelligence markets, but analysts remained concerned about regulatory approvals.

Nvidia officials told analysts at a conference call that they expect regulatory approval to take about 18 months, which is longer than the average approval cycle. Asked about China, Huang said the issue for export controls is not the ownership of Armani’s intellectual property, but the origin of the IP, which was created in the United Kingdom.

Arm’s IP has been produced, created and developed in Cambridge for more than three decades, Huang said. “And so the amount of code, the amount of innovation is measured in thousands of human years. And so IP will inevitably be in the UK, Arm will be headquartered in the UK. “

Even with that optimism, Rasgone noted that Arm’s licensees are likely to be “in arms”.

“The risk seems to be that Nvidia’s ownership will undermine the current value of the asset,” he said.

Huang and Co. may face Nvidia’s toughest fight, but if they win over regulators and arm customers, the company has a chance to become Silicon Valley’s new chip king over a pair of long-time rivals.