Nvidia acquires Arm in $40 billion deal

Joanna Estrada
September 15, 2020

The US$40 billion sale of British chip designer Arm to Nvidia by Japan's SoftBank is a disaster that will destroy its business model and should be blocked, Arm's co-founder said.

Basically, Arms develops some similar tech to NVIDIA, but mostly deals in areas where the previously GPU focused designer doesn't normally work with on a frequent basis.

"Arm Cambridge will be a world-class technology center", he said.

NVIDIA CEO Jensen Huang noted this deal has helped create a partnership that will push the limits of what computers and the internet are capable of. On the other, Nvidia and ARM were valued roughly equivalently in 2016, while today Team Green has overtaken Intel to become the world's most valuable chipmaker. Nvidia will invest in a state-of-the-art, Arm-powered AI supercomputer, training facilities for developers and a startup incubator, which will attract research talent and create a platform for innovation and industry partnerships in fields such as healthcare, robotics and self-driving cars. While SoftBank sold its entire 4.9 percent stake in Nvidia for over $3 billion in 2019, it reinvested $220 million in the American tech company this year.

Under the terms of the deal, Nvidia will pay Softbank $21.5bn in its own stock and $12bn in cash. Additionally, SoftBank may receive up to $5 billion in cash or common stock under an earn-out construct, subject to satisfaction of specific financial performance targets by Arm.

By acquiring ARM Nvidia is hoping to be well prepared for the age of AI and the Internet of Things.

The deal, announced late Sunday by Nvidia and Arm's parent company, Japanese technology giant SoftBank, raises concerns about the independence of Arm, one of Europe's most important tech companies.

According to NVIDIA, Arm's open-licensing model and IP licensing portfolio will continue as normal while benefitting from NVIDIA technology, with clear, strong assurances on the front of customer neutrality.

Arm has developed energy-efficient processor designs that have enabled 180 billion chips to perform intelligent computing calculations. There's already tremendous uncertainty about what this deal might mean for competition long-term, and whether Nvidia will seek to exploit its ownership of the ARM IP to its own unique benefit in a way that is harmful to the ISA's current licensees. The transaction does not include Arm's IoT Services Group.

Bloomberg reports that "Huang said Nvidia is spending a lot of money for the acquisition and has no incentive to do anything that would cause clients to walk away".

All of this is subject to obtaining regulatory approval from the UK, China, the European Union and the USA, with full completion expected in around 18 months.

But analysts say that Mr. Son is unlikely to want to cede much control to a private-equity firm, a common requirement in take-private deals.

And the BBC reports that two of Arm's co-founders have voiced concerns about a US-controlled company becoming caught up in a United States trade clash with China.

Nvidia is also one of ARM's clients, using its designs to create its line-up of Tegra computer processing units (CPUs).

Other reports by Click Lancashire

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