Nvidia is reportedly preparing to abandon its $40 billion takeover of Arm

The U.S. chipmaker has told partners it’s not expecting the deal to be finalized, the news agency reported, citing people familiar with the matter. SoftBank, which currently owns Arm, is ramping up preparations for Arm to go public in lieu of the Nvidia takeover, according to Bloomberg.

“We continue to hold the views expressed in detail in our latest regulatory filings — that this transaction provides an opportunity to accelerate Arm and boost competition and innovation,” a Nvidia spokesperson told CNBC by email.

A SoftBank spokesperson said, “We remain hopeful that the transaction will be approved.”

An Arm spokesperson directed CNBC to Nvidia’s statement.

Shares of Nvidia fell nearly 5% in morning trading on the news.

The deal has faced close scrutiny from regulators around the world, who worry it would give Nvidia an unfair advantage in the semiconductor industry.

The U.S. Federal Trade Commission last month sued to block the transaction on antitrust grounds, while British regulators are probing the deal over concerns it would pose a threat to national security. Nvidia also faces multiple regulatory obstacles in China, where Arm has a joint venture with private equity firm Hopu Investments.

Arm is often considered the “crown jewel” in the U.K.’s tech industry. Its energy-efficient chip architectures are used in 95% of the world’s smartphones and 95% of the chips designed in China. The company makes money from royalties paid by manufacturers.