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The United States government has filed a lawsuit to halt a $40 billion Nvidia-Arm chip deal.

Earlier this week, the Federal Commission filed a lawsuit to prevent graphics chip maker Nvidia from acquiring chip designer Arm for $40 billion, claiming that the deal would a powerful company that would harm the development of new technologies.

Nvidia Corp., based in Santa Clara, California, announced in September 2020 that it was Arm Ltd., based in the United Kingdom, from Japanese technology giant Softbank in order to “create the world’s computing company for the of artificial intelligence.”

However, there were immediate concerns that Arm would abandon its business model of licensing chip designs to of tech companies, including many of Nvidia’s competitors, as a result of the agreement.

Arm’s chip designs are used in many of the world’s smartphones, and the company is a critical supplier to companies such as Apple and Samsung. It’s also a pioneer in chip technology, which can be used to power artificial intelligence in connected devices such as medical sensors, among other things. Nvidia’s chips are critical to the operation of computers and data centers, and the company claims it faces a diverse range of competitors, ranging from chip manufacturers such as AMD, Intel, and Qualcomm to computer networking providers such as Cisco and tech behemoths such as Google and Amazon, among others.

“The Federal Trade Commission is suing to halt the largest semiconductor chip merger in in order to prevent a chip conglomerate from stifling the innovation pipeline for next-generation technologies,” said Holly Vedova, director of the FTC’s Bureau of Competition, in a press release. “This proposed merger would distort Arm’s incentives in the chip market and allow the combined company to unfairly undercut Nvidia’s competitors,” the antitrust regulator said.

According to the Federal Trade Commission, the merger would the combined company control over the technology that rival companies need to develop their own chips. According to the Federal Trade Commission, this would impede competition in markets where Nvidia uses Arm-based designs, such as systems in automobiles that automate lane changes and prevent collisions, as well as data centers that are critical to cloud computing.

Regulators in the United Kingdom and the European Union have also launched investigations into the transaction, citing concerns about competition.

Nvidia stated that it will “continue to work to demonstrate that this transaction will benefit the and promote competition” after the transaction is completed. The company stated that it will “vigorously contest” the FTC’s lawsuit against it.

Moreover, the company declared its commitment to preserving Arm’s open licensing model and ensuring that its intellectual property is made accessible to all interested licensees, both and prospective.

Nvidia was contacted for comment after an Arm spokesperson failed to respond. A request for comment from a Softbank spokesperson did not receive a response right away.

The Federal Trade Commission (FTC) announced that its four commissioners unanimously voted to file the complaint, and that a is to begin in August 2022.

Joe Biden has called on federal regulators to a more thorough investigation into mergers and anticompetitive behavior in the United States’ manufacturing industry. He appointed Lina Khan, a vocal opponent of big technology, as the new head of the Federal Trade Commission.

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