The 30-year-old has become a key member of the Gunners' squad since arriving from Borussia Dortmund in January 2018, scoring 49 Premier League goals in 74 appearances.
The Gabonese striker's contract runs out in 2021 and Aubameyang has been stalling over signing a new deal as he seeks guaranteed Champions League football.
That leaves Arsenal with a potential decision to make over Aubameyang's future, with Barcelona showing their interest.
And club legend Nicholas believes the north London side may have to cash in to fund Arteta's overhaul of the squad.
"This guy is a goal machine, his record tells you that," he told Sky Sports.
"The evidence says the last thing you want to do is lose a player like Aubameyang. He is a magical goalscorer.
"The only way his sale might be acceptable is if it funded a rebuild. Arsenal have been trying to rebuild for five years, maybe even more, and they have never come close to achieving that.
"They dropped out of the Champions League and have lost revenue.
"They do not want to lose Aubameyang in terms of what he brings to the table, but Arsenal have failed abysmally when it has come to players running down a contract.
"You only have to look back at Aaron Ramsey leaving the club last summer to know how bad they've been in this area.
"Arsenal might be able to make selling him work if they got the rebuild right, but the reality is that he is absolutely vital to the team."