Nvidia in Talks with SoftBank to Acquire ARM

Nvidia in Talks with SoftBank to Acquire ARM

Nvidia is reportedly in talks with SoftBank to buy ARM in a deal worth over $32 billion. SoftBank Group Corp. has been exploring ways to sell the British chipmaker that it bought four years ago for $32 billion.

People familiar with the matter said negotiation is in an advanced stage and the parties may reach a deal in the next few weeks, though it is still confidential. Sources said Nvidia is the only company bidding but it is not clear if the deal will be successful.

According to people with the knowledge of the matter, SoftBank may welcome interest from other suitors if it fails to reach an agreement with Nvidia.

ARM is an English tech company with a great reputation in chip making. It makes chips for modern devices including smartphones, an area where Nvidia is yet to find foothold. But there is a challenge; Bloomberg reported that ARM’s customers, including Apple, Samsung, Qualcomm, Advanced Micro Devices and Intel could demand assurances that a new owner would continue providing equal access to ARM’s instruction set. It was the concern that led to SoftBank buying ARM the last time it went up for sale, because it is a neutral company.

However, analysts believe that purchasing ARM would help Nvidia to accelerate innovative ideas.

“With Nvidia’s low-cost fabless model enabling it to focus on R&D, engineering and programming, the fit with Arm would be perfect,” said Neil Campling, an analyst at Miraband Securities.

Analyst at Rosenblatt Securities, Hans Mosesmann noted that Nvidia is the largest maker of graphics processors and it’s spreading the use of the gaming component into new areas such as artificial intelligence processing in data centers and self-driving cars. Matching its own capabilities with central processor units designed by Arm may enable it to take on Intel and Advanced Micro Devices in a more comprehensive way. Mosesmann said the acquisition of Arm may cost Nvidia over $55 billion.

“You need control of BOTH CPU and GPU roadmaps and this, of course, includes data centers. Strategically, Nvidia needs a scalable CPU that can be integrated into its GPU roadmap, as is the case with AMD and Intel,” he said on Friday in reference to central processing units and graphic processing units.

Nvidia has turned a big name in chip making, becoming the world’s largest graphics chipmaker. The California-based company has witnessed more than twenty-fold surge in stock, according to Bloomberg, giving it the opportunity to take on bigger deals. Nvidia’s market value has increased over time to more than $260 billion, making it more valuable than Intel.

Much of its success is attributed to architectural diversity into smart cars, data centers and networking gear. New Street Research LLP said the company could be worth $44 billion if it pursues an initial public offering next year, and estimates its valuation to rise to $68 billion by 2025.

ARM has been enjoying patronage from big tech companies as its designs become top choice for Android and iOS systems. Recently, Apple announced it is dropping Intel as it intends to switch its Mac computers over to ARM-based chipsets.

So if the deal is successful, ARM could go public as early as next year, according to people familiar with matter.

SoftBank is looking for money to offset its heavy debt by selling off some of its assets, including part of stake in Alibaba, and a part of its holdings in T-Mobile US Inc. a sale of ARM at this point means the Japanese conglomerate will have more money at its coffers to appease distraught investors.

But purchasing ARM will trigger heavy scrutiny from regulators because Nvidia is a customer of ARM, and it is a competitor to other companies that get their designs from ARM.

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