SoftBank Group is in advanced talks with Nvidia Corp, and we could see the GPU manufacturer become Arm’s new owners. An unidentified source has told Bloomberg that Nvidia is the only concrete suitor and that the deal could happen within the next few weeks.
This speculation comes on the back of SoftBank’s attempt to raise 4.5 trillion yen ($42.5 billion) in response to losses incurred on WeWork and Uber Technologies. Due to tensions rising among investors, the Japanese conglomerate has already sold parts of its stakes in Chinese eCommerce giant, Alibaba, and major US carrier, T-Mobile. In June, SoftBank Founder and Arm Chairman Masayoshi Son had revealed that they had met 80% of the 4.5 trillion yen target.
Regardless, the sale of Arm Ltd. would help Softbank’s finances significantly, given the market value of the chipmaker. SoftBank purchased Arm back in 2016 by paying $32 billion for making a fully-owned asset. Any new deal between Nvidia and SoftBank for fully acquiring Arm would be above $32 million. Rosenblatt Securities analyst, Hans Mesesmann, estimates Nvidia would have to pay up to $55 billion for SoftBank to let go of their prized asset. Any deal above $32 billion would make it the biggest deal in the semiconductor industry.
However, the deal is nowhere near the completion and has the possibility of falling through. Arm is a big player in the industry, with many big companies reliant on their instruction set architecture. Apple, Qualcomm, Intel, and many others license the Arm chips’ intellectual property to make their own, which is why Nvidia’s acquisition would raise concerns. Nvidia is also a current Arm customer for it’s Tegra line of processors used in Nintendo Switch and Nvidia Shield.
Arm’s current customers will want to ensure that players in the same industry do not disrupt their use of Arm’s IP. The opposition would also not want Nvidia to direct Arm’s expertise to gain an advantage in the future. While Nvidia is more known for its graphics processors, with Arm, they could extend into the computer or mobile processors too. Arm currently has a 90% global market share in smartphone processor architecture.
According to Nikkei Asian Review, SoftBank may sell Arm partially or take it public as soon as next year. Arm’s push into powering smart cars, data centers, and networking gear has benefitted its value. If Arm goes through IPO next year, it could be worth $44 billion at that time and $68 billion by 2025.
SoftBank’s Son has repeatedly added to the IPO speculation since 2016, which could mean Nvidia will only be buying shares of Arm. Either way, Nvidia and Arm can both benefit from any deal that sees them work together. Nvidia is already a player in data centers processors, where Arm also holds a 5% market share.
While an upwards of $32 billion for acquiring Arm seems like a substantial investment, Nvidia is a company that can pull that off. The California-based GPU maker itself has a $260 billion valuation that has surpassed Intel’s in recent times. A part-deal would also benefit whatever plans Nvidia has going forward. Arm’s popularity in the semiconductor industry is the biggest drawing factor for any suitor.