What backing from Nvidia could mean for chipmaker Arm

British chip designer Arm in talks to bring Nvidia as an anchor investor ahead of the company's IPO, according to a report from the Financial Times. Yahoo Finance Tech Editor Dan Howley breaks down why Nvidia is interested in Arm and what the potential investment could mean for both companies. Howley also discusses a federal judge rejecting the FTC's request for an injunction in the Microsoft-Activision Blizzard acquisition.

Video transcript

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- Welcome back. We're watching shares of NVIDIA today after the Financial Times reported British chip designer Arm is planning to bring the tech giant as an anchor investor ahead of its IPO. NVIDIA declined a Yahoo Finance request for comment.

Yahoo Finance's Dan Howley joins us with the details here. All right, so help us flesh this one out a little bit more, Dan.

DAN HOWLEY: Yeah, that's right, Brad. You might remember a while back NVIDIA wanted to actually purchase Arm, but there was a whole bunch of pushback from Arm customers as well as an FTC lawsuit. And so they kind of just backed away from that. And so now this is a chance for them to essentially get in on the ground floor of an IPO in New York. And to kind of have a say over where-- not a say, but a position at the table when it comes to Arm.

Now just to put this all in perspective in what Arm means. They're basically in every smartphone you can think of. Their designs are used by companies ranging from Apple to Samsung, as far as smartphone makers go. Those companies then kind of reconfigure the designs to be their own.

They're also in smartwatches. We're seeing them in more devices. They're going towards more PCs. Increasingly, there's discussion of whether or not this is kind of AI kind of company. It's not going to be an NVIDIA as far as that goes.

But why NVIDIA is interested, or was interested, in Arm is because they need CPUs. They do put out a CPU GPU combo product, but NVIDIA is all about GPUs. GPUs drive AI. But to power those GPUs, you also need CPUs. NVIDIA getting a seat at the table when it comes to Arm, as a public company, would be important just because it would allow them to see what's going on as far as CPUs go and then be able to plan accordingly.

So this could be a big move for them. But as you said, they declined to comment. So we can't really go much further as far as speculating goes just because they won't tell us what they want.

- I mean, it's really interesting, though, too because reportedly, according to that Financial Times report, the valuation at which NVIDIA would invest would be much lower than the valuation that SoftBank wants for Arm, right. That's, I guess, says something about the market appetite as well.

DAN HOWLEY: Yeah, and Masayoshi Son cannot be happy about that. That's SoftBank's investment fund had taken a beating as far as the bunch of startups that they had invested in. And so this kind of is seen as a way to win some of those billions back. But yeah, not coming in near where they want.

The valuation for Arm is kind of all over the place, at this point, by billions of dollars. So it's not exactly a definitive, we know how much this is going to go out for. But yeah, I do think that it's been an important company for the tech industry for so, so long.

Most people don't know what Arm is though. They know what a company like TSMC is, they know what a-- well, maybe they do. They know what Intel is, that's for sure, and they know what NVIDIA is and AMD.

But Arm really is an incredibly important company when it comes to the tech industry. It cannot be overstated how important this company is. And so seeing NVIDIA latch on to-- potentially latch on to, according to this report, to the IPO would be really interesting to see.

- Yes, it would. Speaking of very important for the tech industry, Microsoft got a big win in court yesterday, of course. With, basically, a judge saying that it's not going to accept the FTC's request to block that acquisition. What's sort of the read through here? We have seen so much commentary here about what this means for the bigger landscape as well.

DAN HOWLEY: So just-- it's a confusing kind of issue here. The judge was basically stopping the FTC from trying to block Microsoft from closing the acquisition on July 18th. If they didn't meet that deadline, they would have to pay a $3 billion breakup fee, or renegotiate the deal with Activision Blizzard.

It doesn't necessarily mean, though, that the FTC is giving up on its antitrust suit against Microsoft and the deal. So it's not exactly finalized in the US yet. But most experts are saying, look, they lost here. Chances are, they're probably not going to be able to win as far as stopping the deal overall.

So that aside, Microsoft and Activision still have to continue negotiating with the UK and their antitrust enforcer, their market's competition agency, and kind of figure out how they can make the deal happen there.

If it does, what does this mean for Microsoft and the broader gaming landscape? It's a huge win for Microsoft. They would have one of the largest developers for gaming out there, with one of the largest games, Call of Duty. That's a huge win for them on the console front as well as the PC front.

The bigger news and the future news is the mobile gaming side of things. Don't forget, Activision Blizzard also has King, which has Candy Crush and all those other different mobile games that make tons of cash. Microsoft doesn't really have much. Although, if you ask my wife, they certainly do. And the fact that I play the very old Solitaire game on my iPhone, which is from Microsoft. But I digress.

They don't have very much as far as mobile gaming goes. Then there's also the cloud gaming side of things. That would also be a huge boon for them. They would be able to put these kind of Activision Blizzard properties on their Game Pass service. And then as the cloud gaming starts to pick up, they could put them on more mobile devices. So it's a mobile play and it'll definitely play out, both ways.

- I'm a Minesweeper girl myself. Thanks so much, Dan, appreciate it.