Nvidia announces acquisition of ARM Holdings from SoftBank for up to $40 billion.
Nvidia agreed to purchase Arm for up to $40 billion in cash and stock, the companies announced, marking the largest chip deal ever. Nvidia will pay Softbank, Arm's current owner, a total of $21.5 billion in Nvidia stock and $12 billion in cash, including $2 billion payable at signing. Nvidia will also issue $1.5 billion in equity to Arm employees. The deal may include an additional $5 billion in cash or stock if Arm meets specific financial performance targets, bringing the final purchase price to $40 billion. The transaction has been approved by the boards of all three companies—Arm, Nvidia, and Softbank—though it remains subject to regulatory approval in China, the United Kingdom, the European Union, and the United States.
Jensen Huang, founder and chief executive of Nvidia, framed the acquisition as essential to the company's AI ambitions. "AI is the most powerful technology force of our time and has launched a new wave of computing," Huang said. "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." In a letter to employees, Huang outlined the scope of the combination: "Nvidia's AI computing with the vast reach of Arm's CPU. We will engage the giant AI opportunity ahead and advance computing from the cloud, smartphones, PCs, self-driving cars, robotics, 5G, and IoT." Nvidia plans to make its GPU and accelerated computing architecture available to the millions of developers already engaged with ARM, according to Huang.
The deal combines two dominant names in the chip industry. Nvidia dominates the standalone GPU business, with its chips powering 80 percent of the standalone PC graphics card market in the second quarter of 2020, according to Jon Peddie Research. Arm designs the processors in virtually every smartphone on the market and has shipped 180 billion chips to date via its licensees, including Apple, Samsung, and Qualcomm. Huang expressed particular interest in advancing Arm's CPU technology into the data center, noting that Fujitsu's Fugoku supercomputer, the world's most powerful, is powered by ARM. "We are rather unique in being able to take a CPU, and one that has been really, really refined over time, and turn it into a computing platform from end to end: the system, the software, all of the algorithms and all the frameworks. I'm super excited to focus a lot of energy around turning Arm into a world-class datacenter CPU," Huang said.
The acquisition is expected to attract antitrust scrutiny, as Nvidia will gain dominant positions in two significant chip markets. However, Nvidia emphasized its commitment to Arm's independence. The company said that as part of Nvidia, Arm will continue its open-licensing model and its relationships with its licensees in the smartphone industry. Nvidia intends to retain the name and brand identity of Arm and expand its base in Cambridge, England, where the company is headquartered. Arm's intellectual property will remain registered in the United Kingdom.
Analysts view the deal as transformational for the semiconductor industry. "This is one of the most impactful acquisitions to occur in the semiconductor industry for a very long time," said Bob O'Donnell, president, founder and chief analyst at TECHnalysis Research. "Most of the impact will take a while for most people to notice, but it's likely going to have an immediate impact on the strategic thinking of big players like Apple and Qualcomm." O'Donnell added that "From an Nvidia perspective, it's a fantastic strategy because it positions them very strongly in a number of areas and finally gives them the CPU IP that they've wanted for so long." Pat Moorhead, principal analyst at Moor Research, called the deal "not only the largest semiconductor deal by dollar volume at $40B, but I believe the one with the most significant impact."