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Speculation is rife that the merger between Broadcom (AVGO) and software giant VMware (VMW) could be at risk due to concerns over potential Chinese regulatory obstacles. The decline in VMware’s stock price coincided with the Biden administration’s announcement of stringent technology export restrictions aimed at China.
In the stock market today, AVGO shares experienced a 2% drop, closing at 884.40, while VMware stocks saw a more substantial decline of 7.7%, ending at 165.10.
The Biden administration’s unveiling of stricter export controls specifically targeted computer chips designed for processing artificial intelligence software. This development caused Nvidia (NVDA) stocks to tumble on Tuesday as well.
The White House’s move has prompted speculations that China might respond by hindering the high-profile merger between Broadcom and VMware. As of now, China has not issued any official statement regarding the deal.
The approval from Chinese regulators is the final hurdle that needs to be cleared for chipmaker Broadcom’s $61 billion acquisition of VMware. The deal was already approved by U.K. antitrust regulators back in August. Broadcom has previously informed analysts that it anticipates closing the merger by October 30.
VMware, based in Palo Alto, California, is known for providing cloud computing management and networking software solutions.
Should the cash and stock merger proceed as planned, the combined entity will be predominantly owned by current Broadcom shareholders, holding an 88% stake. The remaining 12% will be owned by VMware stockholders.
It is worth noting that the majority of Broadcom’s revenue is derived from semiconductor products. Nonetheless, the company has been actively diversifying into the cloud and networking infrastructure software sector.
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