Nvidia and SoftBank have abandoned Nvidia’s proposed acquisition of Arm, ending a transaction valued at about $40 billion after competition authorities in the United States and United Kingdom raised concerns that combining a dominant chip-design supplier with one of its major customers could harm rivals.

The companies announced the termination Monday night, saying regulatory challenges had prevented completion of the deal. Under the original agreement, Nvidia will retain a $1.25 billion payment made to SoftBank, while Arm will begin preparations for a public offering. The companies’ joint announcement said Arm Chief Executive Simon Segars will step down and be succeeded by Rene Haas.

The collapse removes what would have been one of the semiconductor industry’s largest and most strategically consequential acquisitions. Arm’s architecture underpins processors used in most smartphones and an expanding range of data-center, automotive and embedded systems, making its neutrality important to companies that compete directly with Nvidia.

A deal built around complementary ambitions

Nvidia agreed in September 2020 to buy Arm from SoftBank in a cash-and-stock transaction initially valued at $40 billion. Nvidia argued that combining its expertise in graphics processors and artificial intelligence with Arm’s low-power CPU architecture would create a premier computing company for the age of AI. The original deal announcement promised to maintain Arm’s open-licensing model and headquarters in Cambridge, England.

That pledge did not eliminate competitors’ concern. Arm licenses processor designs and instruction-set technology to a broad ecosystem that includes companies with products competing against Nvidia. Regulators focused on whether Nvidia could gain the ability or incentive to restrict access, raise costs, delay technology or obtain sensitive information from Arm licensees.

The strategic stakes have risen as semiconductors become more central to cloud computing, artificial intelligence, automobiles and connected devices. Arm’s business model differs from that of a conventional chip manufacturer: its value derives from supplying intellectual property broadly across the industry rather than producing most finished chips itself.

U.S. regulators saw a threat to competition

The Federal Trade Commission sued in December to block the acquisition, arguing that it would give Nvidia control over technology on which competing chipmakers depend. The FTC’s complaint announcement identified markets including advanced driver-assistance systems, data-center networking and Arm-based CPUs for cloud providers.

The agency’s theory was fundamentally about vertical integration. Nvidia and Arm are not direct substitutes in many markets, but Nvidia competes with firms that license Arm technology. Owning Arm could therefore allow Nvidia to shape the input on which its competitors rely.

After the companies terminated the transaction, the FTC said in a statement that abandoning the merger preserved competition and prevented what it described as further concentration in critical chip markets. The case shows the Biden administration’s willingness to challenge large technology transactions even when the firms are positioned at different levels of a supply chain.

Britain raised national and competition concerns

The United Kingdom conducted its own extended review because Arm is one of the country’s most important technology companies. The Competition and Markets Authority concluded in an August assessment that the acquisition raised serious competition concerns across data centers, gaming, the Internet of Things and autonomous vehicles.

The British review considered whether behavioral commitments could preserve Arm’s open licensing model but questioned whether such remedies could be effectively monitored over many years in a fast-changing technology sector. The government later ordered a deeper investigation that included national-security considerations.

When Nvidia withdrew, the CMA closed its proceeding and said in a notice that the abandonment ended the need for further merger review. The broader case record documents the authority’s concern that Arm’s role as a neutral supplier made ownership by a major chip company unusually sensitive.

Arm now heads toward public markets

SoftBank bought Arm in 2016 for roughly $32 billion and had expected the Nvidia transaction to generate a substantial return. With that path closed, SoftBank now plans to take Arm public, potentially during the fiscal year beginning in April.

For Arm, an independent listing would preserve the licensing model that regulators sought to protect while giving the company access to public capital. The company faces both opportunity and competition as Arm-based processors move beyond phones into personal computers and cloud servers while alternative open architectures, including RISC-V, attract greater industry attention.

For Nvidia, the end of the acquisition removes a transformative strategic option but does not materially weaken its existing businesses in gaming, artificial intelligence and data-center acceleration. The company can continue licensing Arm technology as it develops CPUs and other products without owning the architecture supplier.

The failed merger also carries a broader message for the semiconductor industry. Governments increasingly view chip technology as strategic infrastructure, and regulators are scrutinizing not only market share but control over foundational intellectual property. In that environment, the ownership of a neutral platform such as Arm can matter as much as the sale of individual processors.