CEOs at Nvidia and Arm Make the Case for Merger

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Nvidia

‘s $40 billion plan to acquire U.K. chip technology provider Arm Holdings will reshape the industry, so rivals are concerned. Thursday, the CEOs of both companies tried again to sell the deal as positive for the industry.

Nvidia (ticker: NVDA) has a lot of people to convince. To go through, the deal needs regulatory approval from the U.S., European Union, U.K., and China. Opposition from other semiconductor companies, and elsewhere in the tech sector, has been mounting for months. Combined, Arm and Nvidia could become a formidable rival of

Intel

(INTC).

At the Six Five Summit Thursday, Arm CEO
Simon Segars
 made the case that if it stays independent, Arm wouldn’t be able to keep up with the increasing demands of its customers for more complex chips that can perform a wider variety of functions.

“As I think of in the future, the range of products our licensees want to build is growing and growing,” Segars said. “What they’re asking from us is increasing and increasing because of the complexity going up, and there is no way that we can do that on our own.”

Beyond supporting Arm at a larger scale, Nvidia CEO
Jensen Huang
said the acquisition is an opportunity to create a company that can generate even more new ideas, and bring more innovation to its customers in the form of intellectual property.

“The benefit to the market, and to the Arm customers will be more IP, better IP, more accelerated road maps and hopefully taking Arm to the far reaches of what is becoming …the diversity of computing that is literally going in every single direction,” Huang said. “You’re covering from cloud, to edge, to [internet of things], to high performance computing, to microprocessors, to accelerated computing—everything.”

Not everyone agrees that the deal is a good idea. Incoming Qualcomm CEO
Cristiano Amon
has said that Arm’s ecosystem of processor technology is powerful because it is open. Arm has long been willing to license its architecture to anyone because it only makes the blueprints for the technology, and doesn’t design or fabricate chips itself.

“Arm already won, and won everywhere,” Amon has said, referring to Arm-based chips powering almost every smartphone. “After the battle is won because of its independence, to say, ‘let’s make it better by taking that away’, doesn’t make any sense.”

There have been reports of other tech companies such as Alphabet (GOOGL), and

Microsoft

(MSFT) urging regulators to intervene. Nvidia announced its plan to buy Arm last year, and said the deal would close in 2022. Nvidia finance chief
Colette Kress
has said the deal is on track.

Nvidia shares rallied in Thursday trading. The stock closed up 4.8% at $746.29 after Jefferies analyst Mark Lipacis raised his target for the stock price to $854 from $740, and reiterated his Buy rating.

Also Thursday, Alphabet’s Google Cloud said that it had selected Advanced Micro Devices (AMD) chips to power a new virtual-machine product it is adding to its cloud-computing offerings. AMD shares rallied 6.1% to $84.95 in regular trading. The Tau VM virtual machines Google announced are a cheap way to add additional capacity for companies using cloud computing.

Write to Max A. Cherney at max.cherney@barrons.com