FTC Chair Lina Khan takes victory lap on blocking Nvidia-Arm merger

Federal Trade Commission Chair Lina Khan cited the surging stock prices of Nvidia and Arm as an example of how blocking mergers can lead to increased innovation.

Speaking at a Bloomberg and Y Combinator conference on Tuesday, Khan said that when the $40 billion merger was called off due to “significant regulatory challenges” in 2022, it forced both companies to innovate and create new products.

The remarks suggest Khan and the FTC see the blocked Nvidia deal, which Khan said would have been “the largest semiconductor chip merger in history,” as an example of a successful antitrust action that doesn’t hamper companies from pursuing financial success or embracing new technologies such as artificial intelligence.

“The trajectories of both companies in the wake of this action has illustrated how organic growth and competition can spur firms to further innovate in ways that benefit the business and public alike,” Khan said at the conference.

The evidence, Khan said, is in the company stock prices.

“Not only has Nvidia remained the leading AI chipmaker in the AI chip arms race, with a surging stock valuation, but Arm ended up going public and has a forward earnings multiple that is more than double Nvidia’s,” Khan said.

In September 2020, Nvidia announced plans to acquire Arm for $40 billion in cash and stock. Both firms hailed the deal as a way to create the premier computing company for the “age of AI.”

But the acquisition quickly met resistance from regulators in the U.S., Europe and Asia. Arm’s core technology, its instruction set architecture, is used by companies such as Apple, Google and Qualcomm to build processors. Arm is often described as a “neutral supplier” that doesn’t compete with its customers.

Those companies and regulators worried that Nvidia could control access to Arm’s architecture, giving it…