Last September, NVIDIA (NASDAQ: NVDA) agreed to buy Arm Holdings from the Japanese conglomerate SoftBank Group (OTC: SFTBF) for $40 billion. Arm, which is based in the U.K., doesn't sell any chips on its own. It licenses its low-power chip designs and architecture to chipmakers like NVIDIA, Qualcomm , and Apple .
More than 95% of the world's smartphones now run on Arm-based CPUs. Arm-based chips are also gaining ground in the PC and data center markets, which mainly run on Intel and Advanced Micro Devices ' x86 chips.
By buying Arm, NVIDIA would no longer pay any licensing fees for its own Arm-based CPUs , and it could generate a fresh stream of higher-margin licensing revenue from other chipmakers . It could also design new Arm-based chips internally, which could work alongside its high-end GPUs for data centers.
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NVIDIA's Bid for Arm Still Needs to Clear These 5 Hurdles