In a nutshell: Nvidia's protracted and troubled $40 billion acquisition of Arm could soon be abandoned by the graphics giant after repeated attempts to convince governments and regulatory boards to green-light the deal. If it does fall through, the process will have cost Nvidia over a billion dollars -- the penalty fee it agreed to pay SoftBank if the takeover failed.

Bloomberg's sources say that Nvidia has told its partners that it doesn't expect the transaction to close, and current owner SoftBank is now preparing for an Arm IPO, an alternative that was rumored in July last year. It was back in September 2020 when Nvidia confirmed it would be acquiring Arm for $40 billion. The company noted it would take up to 18 months to complete and that a multi-national deal of this size would require regulatory approval from the UK, China, the European Union, and the United States.

But the purchase has been beset with problems from the beginning. It attracted the attention of the UK's Competition and Markets Authority's (CMA) watchdog, which launched an investigation before the country's government also intervened.

There were also the vocal demonstrations from much of the tech industry, including Qualcomm, Google, and Microsoft; even Arm's co-founder, Hermann Hauser, said the deal would be a disaster.

There have been problems in the US, too, where the FTC sued to block the purchase over fears it would stifle competition, while China threatened to block the acquisition even if others didn't. An extended EU antitrust investigation in October brought more talk of trouble and an Arm IPO, which now seems even more likely.

"We continue to hold the views expressed in detail in our latest regulatory filings -- that this transaction provides an opportunity to accelerate Arm and boost competition and innovation," Nvidia spokesman Bob Sherbin said. "We remain hopeful that the transaction will be approved," a SoftBank spokesperson said in an emailed statement to Bloomberg.

A failed deal will hit Nvidia in the pocket. SoftBank and Arm are entitled to keep the $2 billion Nvidia paid at signing, including a $1.25 billion breakup fee, no matter what happens.