12 July 2023
If you are covering the news that Nvidia is considering becoming an anchor investor in Arm, and the CMA is willing to discuss the Microsoft/Activision Blizzard deal, please find below comments from Ben Barringer, equity research analyst at Quilter Cheviot:
Nvidia
“There were rumours that Intel wanted to be an anchor investor in Arm, so it is no surprise to see Nvidia also come back to the party. Ultimately, Softbank is playing the tech field and trying to get all the big players on board to drive up the price and achieve the greatest value possible.
“Arm is the ‘Switzerland’ of processing IP. Anyone can buy a license and start making electronics using Arm and as such they are a crucial player in the technology cog. As such, having it controlled by one industry players was never going to work and thus having anchor investors helps to alleviate that problem. It is unlikely one company will be a dominant anchor investor.
“Following this news, watch the moves from Apple and Microsoft. Apple is Arm’s biggest customer and as such will want influence in order to secure its supply. Following the struggles of 2022, the tech industry is maintaining the momentum seen from the AI surge, and as such there will be a lot of jostling to maximise capabilities and value where possible. We are entering a new arms race, and this is just the beginning.”
Microsoft/Activision Blizzard
“The CMA has been keen to put its stamp on global competition regulation and wants to be seen as a positive influence for the consumer. However, it too has to react to events outside its control and following the judgement in the US it has extended an olive branch to Microsoft to help get this deal over the line.
“The CMA has said previously that the cloud gaming part of the merger was the issue, so it is likely we see some sort of asset sale from this part of the business. Whether it goes as far as the CMA originally wanted remains to be seen, but it certainly won’t want to just roll over. This has also come on the back of criticism that the its attempt to carve out a role for itself had resulted in it becoming anti-business. This could also be a row back on this to help with that image.
“Ultimately, as with much of these things, a compromise will likely be reached that will keep most of the parties happy. Adobe will also be watching very closely given the CMA had similar concerns on its deal with Figma.”
