Tesla chief executive Elon Musk has signaled concern over Nvidia ‘s $40 billion bid for chip technology company Arm, adding to the group of companies and executives that have vocally opposed the deal.
His opposition didn’t do much to Nvidia (ticker: NVDA) stock, though. Shares ended Monday up 0.2%, at $226.884. The S&P 500 gained 0.4%. The Dow Jones Industrial Average finished down 0.2%.
Nvidia’s deal to acquire Arm would upend the chip industry, bringing together a company that is known for its graphics chips, which are also used in data centers to power artificial intelligence applications, with a business known for its processors in smartphones and desktops. Musk and Tesla’s opposition was reported by the Sunday Telegraph.Tesla might care about the outcome of this deal for a few reasons—some obvious and others not so obvious.
Tesla, for starters, is heavily investing in its autonomous driving technology. The computers that make self-driving car features possible have to process graphics. Nvidia also has autonomous driving capabilities and sells systems to other auto makers and suppliers. Tesla doesn’t want a key competitor to win. That’s one reason for opposing the deal.
Tesla is also an Arm customer, using its chips as part of its self-driving computer. If Nvidia buys Arm, Tesla might be forced to buy chips from a competitor. That’s another reason why Tesla might be upset.
— CleanTechnica (@cleantechnica) June 15, 2019
Then, there is the changing structure of the chip industry.
“This deal would make a juggernaut,” said Wedbush analyst Dan Ives, pointing out that Tesla is investing more in developing its own computing power. “Now with Tesla in chip game Musk focused on it.”
Musk might not want to see others expand their technology platforms at a rate faster than his company.
Tesla didn’t respond to a request for comment about its concerns surrounding the deal. Nvidia declined to comment.
Owned by Japanese investors SoftBank, Arm licenses the tech that’s used to design processors used by the likes of Apple to power its iPhones and personal computers. The chip designer’s customer neutrality in its licensing process, which Nvidia pledges to keep, has been an essential part of its success and business model. Critics say Nvidia’s ownership of Arm would threaten its neutrality.
Losing neutrality, along with creating a chip juggernaut, might be why the Arm acquisition has proved divisive. Microsoft (MSFT), and Alphabet (GOOGL), oppose the transaction, according to reports. Other companies such as Marvell (MRVL), Broadcom (AVGO), and MediaTek support it.
For the deal to go through, Nvidia needs approval from the U.S., the U.K., China, and the European Union. On Friday, Nvidia said it expected to seek approval from the European Union. Earlier this month, the U.K.’s Competition and Markets Authority said it had serious concerns about Nvidia’s plans, and called for an in-depth investigation into the transaction.