WASHINGTON — The Federal Trade Commission on Thursday sued to block Nvidia’s $40 billion acquisition of a fellow chip company, Arm, halting one of the biggest semiconductor industry deals in history, as federal regulators push to rein in corporate consolidation.

The FTC said the deal between Nvidia, which is based in California and makes chips, and Arm, a British company that designs chips, would stifle competition and harm consumers. The proposed deal would give Nvidia control over computing technology and designs that rival firms rely on to develop competing chips.

“Tomorrow’s technologies depend on preserving today’s competitive, cutting-edge chip markets,” said Holly Vedova, director of the FTC’s competition bureau. “This proposed deal would distort Arm’s incentives in chip markets and allow the combined firm to unfairly undermine Nvidia’s rivals.”

The action against the deal is the first major merger decision by the FTC under the leadership of Lina Khan, a critic of big corporate mergers and monopolies in technology.

In a statement, Nvidia said it would contest the FTC lawsuit. “We will continue to work to demonstrate that this transaction will benefit the industry and promote competition.”

The companies announced the merger in September 2020 and said it would position the companies as leaders in semiconductors for artificial intelligence. Arm is owned by Japanese conglomerate SoftBank.


Nvidia CEO Jensen Huang said at the time that artificial intelligence would set off a new wave of computing and that “our combination will create a company fabulously positioned for the age of AI.”

The FTC said the merger would give Nvidia access to sensitive information about its rivals, which license technology and designs from Arm.

“Licensees rely on Arm for support in developing, designing, testing, debugging, troubleshooting, maintaining and improving their products,” the FTC said in a statement. “Arm licensees share their competitively sensitive information with Arm because Arm is a neutral partner, not a rival chipmaker. The acquisition is likely to result in a critical loss of trust in Arm and its ecosystem.”

The vote to block the merger was unanimous among the FTC’s commissioners, and an administrative trial for the lawsuit is scheduled for May 10, the agency said.