The US Federal Trade Commission (FTC) has sued to block Nvidia’s $40 billion acquisition of chip designer Arm.

The merger is also currently being investigated by the UK’s Competition and Markets Authority (CMA.)

In August, the competition watchdog said that the merged business would have a “significant degree of control over key technologies for a range of sectors,” including artificial intelligence.

The FTC claimed that the proposed deal would give Nvidia, one of the largest chip companies, control over the computing technology and designs that rival firms rely on to develop their own competing chips.

The complaint alleges that the combined firm would have the means and incentive to stifle innovative next-generation technologies, including those used to run datacentres and driver-assistance systems in cars.

"The FTC is suing to block the largest semiconductor chip merger in history to prevent a chip conglomerate from stifling the innovation pipeline for next-generation technologies,” said FTC bureau of competition director Holly Vedova. “Tomorrow’s technologies depend on preserving today’s competitive, cutting-edge chip markets."

Vedova added: "This proposed deal would distort Arm’s incentives in chip markets and allow the combined firm to unfairly undermine Nvidia’s rivals. The FTC’s lawsuit should send a strong signal that we will act aggressively to protect our critical infrastructure markets from illegal vertical mergers that have far-reaching and damaging effects on future innovations.”

A Nvidia spokesperson said: "As we move into this next step in the FTC process, we will continue to work to demonstrate that this transaction will benefit the industry and promote competition."

They continued: "NVIDIA will invest in Arm’s R&D, accelerate its roadmaps, and expand its offerings in ways that boost competition, create more opportunities for all Arm licensees and expand the Arm ecosystem. NVIDIA is committed to preserving Arm’s open licensing model and ensuring that its IP is available to all interested licensees, current and future."

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