Nvidia’s (NVDA) $40 billion deal to purchase the U.K.-based chip developer ARM from SoftBank is all but dead. That’s at least what Susquehanna senior equity analyst Chris Rolland took away from Nvidia’s leadership during the company’s Q3 earnings call on Wednesday.

“I think some of the commentary [on Wednesday] kind of puts the final nail in the ARM coffin here,” Rolland told Yahoo Finance Live.

Nvidia initially made the $40 billion deal public in September 2020 with expectations that it would be finalized within 18 months, or the first quarter or 2022. During the company’s earnings call, however, it laid out the huge regulatory obstacles it needs to clear including enhanced regulatory scrutiny in the U.K, where ARM is based. The U.S., E.U., and China would also have to approve the deal.

"Regulators in the U.K. and the EU declined to approve the transaction in Phase 1 of their review processes, expressed numerous concerns, began a more in-depth Phase 2 review on the transaction’s impact on competition, and, in the UK, a Phase 2 review of the impact on the UK’s national security interests," the company said in a statement following its earnings report.

"Although regulators and some ARM licensees have expressed concerns or objected to the transaction, we continue to believe in the merits and benefits of the acquisition to ARM, its licensees, and the industry."

Tech industry players including Microsoft (MSFT), Qualcomm (QCOM), and Google (GOOG, GOOGL) have pushed back against the proposed deal.

ARM licenses its designs and software to third parties including Qualcomm, Apple, Google, and Nvidia, which use those designs to develop their own custom chips. ARM is widely considered a neutral player in the tech industry, because it partners with such a diverse array of companies. Think of it as the tech world’s Switzerland.

The fear is that if Nvidia purchases ARM, that neutrality will fade away. Nvidia, however, has pushed back against that claim.

“The benefit of ARM being part of Nvidia is that we could accelerate their R&D scale,” Nvidia CEO Jensen Huang told Yahoo Finance Live. “ARM, as you know, are quite successful in mobile devices. But we could help them be much more successful in all other areas of computing.”

If the deal is done for, as Rolland says, investors aren’t bothered. Shares of Nvidia jumped more than 8% on Thursday following the company’s blockbuster Q3 earnings report, during which Nvidia announced revenue grew by 50% year-over-year.

“It was already [baked] in the stock, the fact that this deal is not going to happen,” Rolland said.

It’s not as though Nvidia hasn’t worked with ARM in the past and won’t in the future, either. As Rolland points out, Nvidia previously built out its own ARM-based server. And its Tegra CPU is the ARM-based chip that powers Nintendo’s Switch console.

“They could license this, and they have had some success in the past on the CPU front,” he said.

As for Nvidia’s ability to deal with the ongoing chip shortage and global supply chain crunch, Rolland says Nvidia is far better off than other chipmakers.

“Nvidia is in a very fortunate position, particularly versus its peers. And that’s because of its dual supply and sourcing strategy. They hit both Samsung and TSMC foundries for supply and because of that it puts them in a much better position overall,” Rolland said.

Still, that doesn’t mean Nvidia chips will be easier to get anytime soon. According to Huang, the chip shortage will constrain supply through the next year.

As for Nvidia’s sky-high valuation — the company’s price to earnings ratio stands at 113.45 for the trailing 12 months — Rolland says it’s largely justified.

“This is a company that has been consistently beating and raising and working into the multiple and taking massive share in potentially huge markets," he said, "and that is what the excitement around the stock is all about.”

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