Nvidia Corporation (NASDAQ:NVDA) has agreed to buy British chipmaker Arm for US$40bn in a mixture of cash and shares from its Japanese owner, SoftBank.
The US chip designer, the seventh biggest company in the NASDAQ, will pay US$2bn at the signing of the deal as part of a US$12bn initial cash element, with US$21.5bn to be paid in stock at the closing of the deal.
SoftBank, which paid US$32bn for Arm in 2016 could be paid another US$5bn, in cash or stock, based on Arm’s performance, with US$1.5bn to be paid to Arm employees in Nvidia stock.
The Japanese investment group will own close to a 10% stake in Nvidia.
Government and industry objections?
Nvidia, which was reported to have been in talks since before July, said it intends to keep the Arm name and pledged to expand its base in Cambridge, with Arm’s intellectual property to remain registered in the UK, though the government may demand stronger commitments.
The agreement is by no means cast-iron yet, said analysts at Hargreaves Lansdown, noting that Softbank's 2016 acquisition of one of the UK’s technological jewels was politically sensitive and required commitments to the government about the Cambridge site, which are due to expire in 2021.
Nvidia said it was committed to establishing a new “global center of excellence” in artificial intelligence (AI) research at Arm’s Cambridge base. This, Nvidia said, will include investment in building “a state-of-the-art, Arm-powered AI supercomputer, training facilities for developers and a startup incubator, which will attract world-class research talent and create a platform for innovation and industry partnerships”.
Furthermore, there are likely to be strong industry objections, analysts at CCS Insights said, as Arm licenses its technology to Nvidia rivals such as Intel, Qualcomm and Samsung: “An acquisition by Nvidia would be detrimental to Arm and its ecosystem. Independence is critical to the ongoing success of Arm and once that is compromised, its value will start to erode.”
Hargreaves Lansdown's Nicholas Hyett at said “While Nvidia is best known for its gaming graphics chips and Arm for its smartphone chips, this deal is being predicated on artificial intelligence – an area where Nvidia has expertise but which is really in its infancy.
“By drawing on Arm’s huge pool of active devices, as well as its technical knowhow, Nvidia’s hoping it can crack a technology with potential applications in cloud, smartphones, PCs, self-driving cars, robotics and the Internet of Things.”
Jensen Huang, founder and CEO of Nvidia, said AI is “the most powerful technology force of our time”.
“In the years ahead, trillions of computers running AI will create a new internet-of-things that is thousands of times larger than today’s internet-of-people. Our combination will create a company fabulously positioned for the age of AI."
He praised Arm boss Simon Segars and his team for building a company that is “contributing to nearly every technology market in the world” and said the aim was to unite Nvidia’s AI computing capabilities with Arm's vast CPU ecosystem for applications in fields such as healthcare, robotics and self-driving cars.
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