FTC Chair Lina Kahn Takes Victory Lap in Blocking Nvidia-Arm Merger

Federal Trade Commission Chairman Lina Hahn cited the surge in stock prices of Nvidia and hand as an example of how blocking mergers can lead to increased innovation.

Speaking at Bloomberg and Y Combinator conference on Tuesday, Hahn said that when the $40 billion merger was called off due to “significant regulatory challenges” in 2022, it forced both companies to innovate and create new products.

The remarks suggest that Hahn and the FTC see the blocked Nvidia deal, which Hahn said would have been the “biggest semiconductor chip merger in history,” as an example of successful antitrust action that doesn’t prevent companies from pursuing financial success or to adopt new technologies such as artificial intelligence.

“The trajectories of both companies as a result of this action illustrated how organic growth and competition can drive firms to further innovate in ways that benefit both business and society,” Khan said at the conference.

The proof, Khan said, is in the company’s stock prices.

“Not only has Nvidia remained the leading AI chipmaker in the AI ​​chip arms race, with a rising stock valuation, but Arm eventually went public and has an earnings multiple that is more than double Nvidia’s,” Han said.

In September 2020, Nvidia announced plans to acquire Arm for $40 billion in cash and stock. Both firms hailed the deal as a way to create a leading computer company for “age of AI.“

But the acquisition quickly ran into resistance from regulators in the US, Europe and Asia. Arm’s core technology, its instruction set architecture, is used by companies such as Apple, Google and Qualcomm to build processors. Arm is often described as a “neutral supplier” that does not compete with its customers.

Those companies and regulators worried that Nvidia could control access to Arm’s architecture, giving it the power to block access to a key input needed to manufacture their chips. Nvidia said it would invest in Arm and allow other companies to continue using Arm’s chip designs, preserving the company’s licensing model.

The Federal Trade Commission filed a lawsuit in late 2021 to block the merger, and combined with pressure from other regulatory challenges, the deal fell through less than three months later.

“Our team decided that giving one of the largest chip companies control over the computing technology and design that rival firms rely on to develop their own competing chips would be bad for competition and would make it harder for technology innovation from next generation,” Khan said Tuesday.

Shares of Nvidia soared after the deal was canceled as the company established a leadership position in artificial intelligence chips. Nvidia’s value has nearly tripled, largely due to the strength of sales of its server AI chips such as the A100 and H100. It is now worth just under $2 trillion, the third most valuable company in the US.

Arm shares have more than doubled since the company went public in August 2023, although SoftBank still owns 90% of the company. Investors have boosted its stock price on the hope that its technology will be essential to the development and deployment of AI software.

Arm is now worth more than $143 billion and, as Han noted, investors have given the company a high earnings yield, suggesting they see strong growth in the company’s future.

Representatives for Nvidia and Arm declined to comment.

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