Arm's open approach for licensing its designs to various companies has created a vast ecosystem that spans smartphone central processing units (CPUs), computers and tablets.
That $40 billion purchase price also includes $1.5 billion in equity compensation for existing Arm employees, which now number more than 6,000 according to the company. SoftBank will remain committed to Arm's long-term success through its ownership stake in NVIDIA, expected to be under 10 percent.
And if the deal does pass muster with regulators, will chip makers that are now licensing Arm designs look elsewhere?
But experts say one risk Nvidia faces is that the takeover could encourage ARM's wider client list to shift focus to a rival type of chip technology, which lags behind in terms of adoption but has the benefit of not being controlled by one company.
The deal, which was announced late Sunday by Nvidia and Arm's parent company, Japanese technology giant SoftBank, raises concerns about the independence of Arm, one of Europe's most important tech companies.
For Softbank the original investment in the business has paid off financially: four years ago the holding company paid $32 billion for ARM.
Owing to the complex ownership structure and the multiple countries involved, closing is expect to take one and a half years, and will require regulatory and antitrust approvals in the US, the United Kingdom where Arm is headquartered, China, and the European Union.
The Nvidia-ARM rumors we've been reporting on for the past few months have culminated in a major announcement: Nvidia will acquire ARM for ~$40B in cash and stock.
A SoftBank store in Tokyo, Japan.
Jensen Huang, CEO of Nvidia, told a press conference on Monday that his company would not change Arm's licensing business model and was willing to expand the licensing to even Nvidia's own technologies. He drove its expansion into new segments like the "Internet of Things" - connecting up machines and appliances - as well as a software business based on data collected from Arm-embedded devices.
However, as with most tech-related deals these days, the purchase of ARM by NVIDIA could set off antitrust alerts.
Being owned by a US company could mean Arm is exposed to USA government export bans at a time when Washington is in a battle for tech supremacy with China. Up until now, ARM has agreed to abide by United States trade restrictions with China despite not being a US-owned company. Apple already uses the Arm architecture to design its other processors (for iPhone, iPad and so on). Up until now, ARM has been either an independent company or owned by a company outside the semiconductor industry. Regulatory agencies could put such a deal under intense scrutiny and ARM customers like Samsung and Apple could try and put the kibosh on the transaction. In May, Nvidia said it was buying Cumulus Networks for an undisclosed sum.