Nvidia Commits to Buy Arm for $40B

By Todd R. Weiss and George Leopold

September 14, 2020

Nvidia is acquiring semiconductor design company Arm Ltd. for $40 billion from SoftBank in a blockbuster deal that catapults the GPU chipmaker to a dominant position in the datacenter while helping troubled SoftBank reverse its financial woes.

The deal, which has been rumored for more than a month, will bring together Nvidia’s graphics chips and AI computing platform with Arm’s intellectual property for popular computer and mobile chips and technologies in what the companies hope will be a combined ecosystem to lead in the fields of AI and advanced-scale computing.

“Big deals require big commitments,” said analyst Jon Peddie, president of Jon Peddie Research. “Nvidia demonstrated that with its Mellanox acquisition and it has done it again with the acquisition of Arm.

Softbank bought Arm only four years ago in July of 2016 in a $32.25 billion all-cash deal, but the Japanese technology investment company has hemorrhaged cash since the first quarter of 2020 and has been looking to sell off assets to raise money. SoftBank’s financial problems arose as earlier bets on the rise of connected devices have failed to pay off. The company’s Vision Fund, it’s AI investment fund, reportedly suffered a $13 billion annual loss in its fiscal year ending in March 2020.

Acquiring Arm solidifies Nvidia’s standing as a major player in wireless and other markets as it makes steady inroads in enterprise datacenters. The GPU leader has released a steady stream of ever-more powerful GPUs targeting machine learning and high-performance computing.

Reports of a pending deal between Nvidia and SoftBank to acquire Arm surfaced in early August. Nvidia moved last year to fully incorporate Arm CPUs into its processing architectures. The chip IP vendor became a more attractive acquisition target after wresting a design win from Intel for Apple devices.

During a conference call Sunday night with analysts and technology journalists, Jensen Huang, founder and CEO of Nvidia, said the acquisition will create the premier computing company for the age of artificial intelligence. The deal brings together Nvidia’s graphics expertise and designs with Arm’s chip IP and designs, along with a partner and developer ecosystem built around both, he said.

The products and IP from both companies is complementary and doesn’t overlap, said Huang, making the deal a smart move for both.

“We will have in one company three incredible platforms,” from Nvidia, Arm and Mellanox, the high-performance networking platform, said Huang. “These three ingredients are the essential components of computing and the opportunity to advance computing across the entire range, from cloud to high performance computing, to PCs, to workstations, to [gaming] console’s to self-driving cars, to robotics and to AI. The amount of computer science horsepower inside this company will be quite extraordinary.”

Anchoring the acquisition is the future of AI, which is built around the need for more computing devices and software that will enable it, said Huang. “It is impossible for one company to build all of those solutions, but it is possible for us to come up with some architectures that every company in the world could benefit from [to use to build those] amazing solutions. And so that’s our mission.”

The acquisition announcement on Sunday night came about after long talks and some massaging of the logistics to reach the deal, Huang said.

“It takes a while to galvanize ideas, and with big ideas like this, timing matters, circumstances matter, the coming together of vision matters,” said Huang. “At some point, it becomes very clear that this is the formation of an extraordinary opportunity.”

Huang confirmed the talks have been ongoing for several months. “This was about creating a company that has the opportunity to address end-to-end, the entire opportunity for the age of AI, [bringing together] the company that is leading the industry in AI computing with … the company that has the most popular CPU in the world with a vast ecosystem of developers and partners.”

Phil Straw, CEO of SoftIron, which provides datacenter appliances based on Arm technology, said he is pleased by the acquisition.

“Nvidia’s aspirations to bolster their GPU-centric offering with Arm will prove to be a real force for innovation in the x86 clone-dominated datacenter landscape,” said Straw. “Nvidia’s acquisition puts a spotlight on Arm technology and its potential to change datacenter architecture that we think is worthy of attention.”

Antitrust issues do loom, however, and industry watchers expect China and European regulations will attempt to slow or derail the deal.

“There will be the naysayers who will whine that the deal is anti-competitive, but why is it any more anti-competitive for Nvidia to have Arm and GPUs than it was for Arm to have CPUs and GPUs or AMD and Intel and Via to have x86 and GPUs?” Peddie said, adding that he expects the deal to eventually pass muster.

“The immediate benefit to both companies is going to be in the GPU,” he added. “Nvidia never could get their power budget down and finally gave up trying. Arm could never get their performance up and finally settled for almost good enough.”

With the marrying of those technologies, “you’re going to see GPUs that will rival, if not exceed Qualcomm on performance [and] power,” the analyst added.

Simon Segars, CEO of Arm, said Arm will remain headquartered in Cambridge, U.K., where improvements and expansions are expected to build a world-class AI research facility to support developments in healthcare, life sciences, robotics, self-driving cars and other fields. In addition, Nvidia will build a state-of-the-art AI supercomputer, powered by Arm CPUs, he said.

“Arm and Nvidia share a vision and passion that ubiquitous, energy-efficient computing will help address the world’s most pressing issues from climate change to healthcare, from agriculture to education,” said Segars. “Delivering on this vision requires new approaches to hardware and software and a long-term commitment to research and development. By bringing together the technical strengths of our two companies we can accelerate our progress and create new solutions that will enable a global ecosystem of innovators.”

Under the terms of the deal, Nvidia will pay SoftBank $21.5 billion in Nvidia common stock and $12 billion in cash, which includes $2 billion payable at signing. Nvidia will also issue $1.5 billion in equity to Arm employees.

The proposed transaction is subject to customary closing conditions, including the receipt of regulatory approvals for the U.K., China, the European Union and the United States. Completion of the transaction is expected to take place in approximately 18 months.

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