China regulators are expected to object to Nvidia's planned acquisition of Britain's chipmaker Arm Holdings from SoftBank given the escalating tensions between China and the U.S. The continuing dispute might spell the end of the $40 billion transaction - which was expected to give the U.S.-based Nvidia a larger market share in the world's chipmaking industry.

The deal between Nvidia and SoftBank, which owns Arm, will have to be approved by regulators from the European Union, the UK, China and the U.S. Several big corporations from all of these areas rely on Arm's advanced chips for their products.

An article published by a state-run tabloid in China claimed the deal between SoftBank and Nvidia was "disturbing" for both China and Europe technology companies. The article said the sale of Arm could give the U.S. government further leverage to strong-arm other nations - particularly after how it had shown that it was willing to extend the dispute into the technology sector.

Since last year, the U.S. administration has been targeting China companies with sanctions. The U.S. placed companies such as Huawei Technologies and ZTE on its Entity List - barring them from doing business with their U.S.-based partners.

"If Arm falls into U.S. hands, China technology companies would certainly be placed at a big disadvantage in the market," the article said.

Arm, one of Britain's most successful companies, supplies its advanced chips and intellectual properties to companies such as Apple, Samsung and Huawei's subsidiary HiSilicon.

China regulators have yet to officially state their stance but state-run news media has made it clear that China might be opposed to the deal. In such a large transaction, China does have a lot of weight. In 2018, China managed to derail the $44 billion takeover of Dutch company NXP Semiconductors N.V. by American chipmaker Qualcomm.

Analysts at Citibank said that because of the trade tensions between the U.S. and China both Nvidia and SoftBank would likely find it very difficult to obtain the necessary international regulatory approvals. The deal, which Nvidia says might be closed within the next 18 months, will be subject to a detailed review by China's Ministry of Commerce.