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Nvidia Stock Gains as U.K. Competition Watchdog Calls for Arm Takeover Probe

'We're concerned that Nvidia controlling Arm could create real problems for Nvidia's rivals by limiting their access to key technologies,' Britain's competition watchdog says of the proposed $40 billion deal.

Nvidia Corp.  (NVDA) - Get NVIDIA Corporation Report shares edged higher Friday after authorities in the United Kingdom said its planned takeover of chipmaker Arm Ltd raised 'serious competition concerns', and called for an in-depth investigation into the $40 billion deal.

Britain's Competition and Markets Authority (CMA) said that even though Nvidia has offered remedies that would alleviate some of its concerns, it nonetheless called for a Phase 2 investigation that could delay the proposed transaction for several more months. 

The CMA cited the potential for restricted access to Arm's intellectual property for Nvidia's rivals, as well as blunting innovation in sectors such as data centres, gaming, the 'internet of things' and self-driving cars. U.K.-based Arm, which is owned by Japan's Softbank Group, makes semiconductors for smartphones, AI, 5G networks and quantum computing. 

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"We're concerned that Nvidia controlling Arm could create real problems for Nvidia's rivals by limiting their access to key technologies, and ultimately stifling innovation across a number of important and growing markets," said CMA head Andrea Coscelli. "This could end up with consumers missing out on new products, or prices going up."

"The chip technology industry is worth billions and is vital to products that businesses and consumers rely on every day," he added. "This includes the critical data processing and data centre technology that supports digital businesses across the economy, and the future development of artificial intelligence technologies that will be important to growth industries like robotics and self-driving cars."

Nvidia shares were marked 1% higher in pre-market trading Friday to indicate an opening bell price of $199.90 each. 

Earlier this week, Nvidia told investors that "discussions with regulators are taking longer than initially thought" with respect to the proposed Arm deal, adding that "we are confident in the deal and that regulators should recognize the benefits of the acquisition to Arm, its licensees and the industry."

The statement followed stronger-than-expected second quarter earnings that included a solid boost to its 2022 profit forecast.