Graphics giant Nvidia will no longer be spending $40 billion to acquire Arm, parent company SoftBank has announced, citing “significant regulatory challenges.” The news was first reported by the Financial Times.

Nvidia will be paying $1.25 billion to SoftBank for failing to go through with the transaction, while Arm CEO Simon Segars is stepping down to be replaced by Arm’s head of IP Rene Haas, who coincidentally used to run Nvidia’s own Arm business many years ago.

“[Segars] has decided that at this stage of his career, the time and energy required to take the company public and everything around that was not something he wanted to sign up to,” Haas tells TechCrunch. “So he’s going to step down. I’m going to take over for him.”

The deal, announced in September 2020, would have been one of the industry’s biggest ever, giving GPU manufacturer Nvidia control of the company whose architecture and intellectual property is key to every practically every smartphone and tablet chip ever made, as well as a growing number of server chips, and Apple’s entire future product roadmap for its impressive Arm-powered laptop and desktop PCs. (Apple’s Arm laptop chips wowed the industry in late 2020, putting other manufacturers on notice.)

Instead, SoftBank now says that Arm will pursue an IPO in the fiscal year beginning April 1st, and Arm will retain its existing license to use Arm tech. Nvidia initially declined to comment to The Verge, not even to confirm or deny that the deal had fallen through, but confirmed it with a press release early Tuesday morning. “Arm has a bright future, and we’ll continue to support them as a proud licensee for decades to come,” reads part of a statement from Nvidia CEO Jensen Huang. SoftBank and Arm also didn’t immediately respond to requests for comment, but Arm issued its own press release on Tuesday confirming the management change (with no mention of Nvidia’s deal).

The deal has been under scrutiny pretty much as soon as it was announced, with Nvidia’s Huang frequently having to defend it in public and eventually admitting it might take much longer than planned. Scarcely two weeks ago, Bloomberg reported that the deal was falling through, after challenges from UK, EU, and US regulators worried about what Nvidia might do if it owned Arm. The FTC also sued to stop the acquisition.

Update, February 8th, 1:30AM ET: Added official confirmation from SoftBank.

Update, February 8th, 12PM ET: Added additional links and Nvidia quote.