EU Scrutinizes Nvidia's $700 Million Acquisition of AI Startup Run:ai Amid Competition Concerns

In April 2024, Nvidia announced its acquisition of the Tel Aviv-based artificial intelligence startup Run:ai, which specializes in applying AI technology for workload management, for a deal valued at $700 million. However, the transaction has caught the attention of regulatory bodies in Europe, leading to an official review by the European Commission to assess potential competition concerns, as initiated by an Italian regulatory request under the EU Merger Regulation (EUMR).

Typically, market regulatory authorities within a country or region will scrutinize a deal if it's believed to significantly impact local market competition. In the European Union, any member state can flag a transaction that they believe poses a serious risk to competition locally and could affect trade within the larger EU market, subsequently requesting a review by the European Commission.

The Italian regulatory authority submitted a request for the commission to take over the review of the Nvidia-Run:ai deal, citing concerns under Article 22(1) of the EUMR that the transaction could significantly affect competition in the markets where Nvidia and Run:ai are active, potentially impacting the entire European Economic Area, including Italy.

After a preliminary assessment, the European Commission concluded that it's best positioned to review the acquisition, given its expertise and history with similar cases in the relevant markets.

Nvidia has been formally notified by the European Commission, initiating a process that requires the submission of extensive documentation detailing the proposed merger for assessment. Should the initial evaluation indicate that the deal may restrict competition within the EU market, the commission will request further documentation for a detailed review. If it's ultimately determined that the transaction would indeed affect market competition, the EU would not approve the deal.

This situation mirrors Nvidia's previous attempt to acquire Arm, a chip designer owned by Japan's SoftBank Group, which faced opposition from multiple major market regulatory bodies. The regulators argued that Nvidia's acquisition of Arm would impact market competition adversely.

Ultimately, without regulatory approval, Nvidia abandoned the Arm acquisition and incurred a significant breakup fee, a common practice in mergers and acquisitions stipulating compensation if the deal falls through.