Nvidia (NVDA) - Get Report shares were pressured Monday after Oliver Dowden, the U.K.'s secretary of state for digital, culture, media and sport, said regulators were intervening in the semiconductor company's proposed acquisition of Arm Ltd.
The British government is looking at the Santa Clara, Calif., company's proposed $40 billion purchase of the British chip designer from Softbank Group SFTBY due to national security concern.
"As a next step and to help me gather the relevant information, the U.K.’s independent competition authority will now prepare a report on the implications of the transaction, which will help inform any further decisions," Dowden said.
An Nvidia spokesperson told CNBC: "We do not believe this transaction poses any material national security issues. We will continue to work closely with the British authorities, as we have done since the announcement of this deal."
Nvidia shares at last check were down 2.7% to $619.47.
Earlier this year, the U.K. Competition and Markets Authority invited third parties to comment on the merger ahead of a formal antitrust investigation. That investigation will probe the deal's possible effects on competition in the U.K.
In February, U.S. federal regulators opened an investigation into the purchase while soliciting information from third parties.
A consortium made up of Alphabet's (GOOGL) - Get Report Google, Microsoft (MSFT) - Get Report and Qualcomm (QCOM) - Get Report, among others, reportedly asked antitrust officials to intervene in the sale, Bloomberg reported. At least one of the companies wants the deal "killed."
The group argues the $40 billion deal would grant Nvidia control over a critical supplier that licenses essential chip technology to companies such as Apple (AAPL) - Get Report, Amazon (AMZN) - Get Report, Samsung and Huawei.
Arm is known as the Switzerland of the chip industry because it licenses its chip designs to whoever is willing to pay for them, including rivals to one another.
The group of tech companies opposing the sale says that once it acquires Arm, Nvidia could limit other companies' access to Arm's technology or raise prices.