Nvidia’s $40 billion acquisition of Arm announced Sunday will allow the company to expand into new markets through Arm’s expansive licensing program and drive the adoption of Arm chips in the data center.

With the Arm purchase and the recently completed Mellanox acquisition, Nvidia now has CPU, GPU, and high-speed networking design, manufacturing, and licensing capabilities under one roof. Nvidia CEO Jensen Huang described the opportunities that will be possible under the combined company during a press briefing

"We will now have in one company three franchises and three incredible platforms," Huang said. "The amount of computer science horsepower that is inside this company would be quite extraordinary, and it allows us to create solutions and platforms that can then be made available to this vast network of partners and developers."

According to Patrick Moorhead, founder and principal analyst at Moor Insights and Strategy, in an article contributed to Forbes, the acquisition "fits like a glove."

"The new Nvidia-Arm combination now plays in nearly every market segment in the data center, edge of data center, personal computers, smartphones, and IoT," he wrote.

While a lot of attention was given to Nvidia’s planned investments in Arm’s headquarters in Cambridge, England, an important component of the deal is the company's embrace of Arm’s licensing model.

Arm processors power nearly every mobile device today, and under SoftBank's ownership, the company has rapidly expanded into the IoT and data center markets. However, Arm simply designs the architecture, building the foundation around the instruction set, and leaves it to partners like Marvell, Qualcomm, Ampere, and others to implement the designs in silicon.

With the integration of Arm under Nvidia, Huang intends to combine the two companies research efforts while not just preserving Arm's core tenants of open licensing and customer neutrality but allowing its own intellectual property to be licensed.

"The customer should realize how excited I am about the business model," Huang said in response to concerns that Arm customers may feel the need to seek alternative architectures to build their chips. "In fact, we're so excited about the business model we're going to take Nvidia technology and put it through Arm's vast channel networks."

As Timothy Prickett Morgan, principal analyst and founder of Next Platform, pointed out during Sunday's press conference, the opportunities won't be limited to Nvidia's graphics technologies.

"You could push the Mellanox technology through the same Arm infrastructure," he said. "There is nothing saying it just has to be Nvidia GPUs. It could be networking stuff too."

It's also important to point out that Nvidia graphics on an Arm package isn't a new concept. Nvidia has licensed the Arm architecture in the past for its Tegra mobile processors. The company also opened its CUDA software platform to Arm last November.

During the press conference, Huang repeatedly referenced Arm's Neoverse architecture, which is the basis for large data-center class CPUs like the Ampere Altra, Marvell's ThunderX2 and forthcoming ThunderX3, and Amazon's Graviton chips.

“We know for sure that data centers and clouds are clamoring for the Arm microprocessor, the Arm CPU,” Huang told Moorhead. “Energy efficiency directly translates to computing capacity, computing throughput, and the cost of provisioning service.”

Questioned whether Nvidia would develop a branded CPU, develop a reference chip, or simply license the company's IP to other manufacturers, Huang tiptoed around the issue saying that all three options were possible but didn't commit to any one.

"Some people would like to license the cores and build a CPU themselves," he said. "Some people may decide to license the cores and ask us to build the CPUs or modify ours and we could build it ourselves. All of those options exist."

He argued that by leveraging a combination of IP from Nvidia, Arm, and Mellanox, it is now possible for manufacturers to build data center chips tailored specific use cases.

"There are going to be so many different types of data centers in the future. There are gigantic cloud ones; there are smaller ones for enterprise; there are high-power density ones for supercomputing; there are ones that are going to fit in locations all over the world in distributed data centers," Huang said. "It's not possible for one company to build every single version of them, but we'll have the entire network of partners around Arm that can take the architectures we come up with and depending on whats just for them whether it's licensing the core, having a semi-custom chip made or just having a chip that we made any of those options are available. We're open for business and we would like the ecosystem to be rich as possible."

Despite considerable concern over potential regulatory challenges to the massive merger, particularly in China, Huang expressed confidence in the companies ability to navigate these waters without incident.

He referenced the company's recent experience wading through the regulatory waters during the Mellanox acquisition.

However, it should be noted that the geopolitical climate has changed drastically since then. Since May the Trump administration has ratcheted up efforts to end U.S. reliance on Asia for the manufacture of semiconductor technologies.

However, some analysts saw this less as an attempt to secure U.S. supply chains and instead an attempt to deny China access to U.S. intellectual property.

Also in May, the U.S. Commerce Department’s enacted new requirements for companies using U.S. equipment, intellectual property, or design software wishing to do business in China.

And while Arm's intellectual property is registered in the United Kingdom, Nvidia's is not.

On the broader regulatory front, Moorhead isn't expecting any substantial challenges likely to prevent the merger.

“Arm licenses IP and Nvidia makes chips, two very different business models which, when combined, don’t appear to create a monopoly,” he wrote. “Nvidia GPUs have 0% smartphone, 0% TV share, and a very small GPU IoT share. Arm has 0% data center GPU, 0% PC GPU market share, and small Chromebook GPU market share. Having watched Huang get quick approval for Mellanox, even in China, gives me confidence the company can hammer this one through.”

That's not to say governments aren't already looking carefully at the deal. The U.K. has already made clear it will closely scrutinize the merger, according to a report published by Reuters on Monday.

“We are investigating this deal further and ministers have spoken to the relevant companies,” a spokesman for U.K. Prime Minister Boris Johnson told Reuters. “The enterprise act provides the government with powers to intervene in mergers where they raise concerns about national security, financial stability, media plurality, and maintaining in the U.K. the capability to combat and to mitigate the effects of public health emergencies.”

Nvidia will need regulatory approval in the U.S., China, and the European Union, which is expected to take approximately 18 months.