Nvidia to acquire Arm for $40 billion

GPU maker Nvidia is acquiring British CPU designer Arm for $40 billion, the company announced Sunday evening. The purchase comes after months of rumors and courting of Arm (and current owner SoftBank) by Nvidia.

Nvidia said in its press release that the move “brings together Nvidia’s leading AI computing platform and Arm’s vast ecosystem” to create the “premiere computing company for the age of artificial intelligence.”

The Age of Artificial Intelligence

“AI is the most powerful technology force of our time and has launched a new wave of computing,” said Jensen Huang, founder and CEO of NVIDIA. “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.”

While Nvidia is generally considered primarily as a supplier of consumer graphics cards and GPUs, the company recently saw its datacenter revenue surpass its consumer GPU revenue.

The company with the golden Arm

Despite the purchase, it sounds like Nvidia is going to leave Arm alone. Arm will stay at its current HQ in Cambridge, where Nvidia plans to expand the campus. Nvidia says its wants to build a “world-class AI research facility” to support industries like healthcare, life sciences, robotics, and self-driving cars. The company also plans to build a state-of-the-art AI supercomputer powered by Arm CPUs at that Cambridge campus.

Further, Arm will continue to operate its open licensing model and to maintain customer neutrality. Arm has deals with many of Nvidia’s competitors and other companies in the silicon business. Nvidia says those companies not only will see no change to their business deals with Arm, but also that they’ll benefit from Nvidia’s contributions to Arm’s business. The GPU maker also plans to retain the Arm name and brand. Arm’s intellectual property will stay registered in the UK, too.

Nvidia will pay $12 billion in cash and $21.5 billion in Nvidia common stock. SoftBank, Arm’s current owner, will retain an ownership stake in Nvidia expected to stay below 10%.

Regulation Imminent

SoftBank purchased Arm in 2016 for $31 billion. Journalist Alistair Barr points out that when SoftBank paid that price, Nvidia was worth just $30 billion (a huge sum, but paltry in comparison), and adds that Nvidia has generated $40 billion in market value since rumors of the purchase first hit in July.

This purchase will certainly kick off all manner of regulatory investigation. Bloomberg notes that China, the UK, the European Union, and US authorities must sign off on the deal. That process may take well over a year, past Nvidia’s estimated purchase completion date of September 2021. Arm customers like Apple are sure to raise a stink, too; That’s despite Nvidia CEO Jensen Huang’s assurance that he doesn’t want to do anything to scare off existing clients. Current owner SoftBank is more of a holdings company and doesn’t otherwise compete with any of Arm’s competitors the way Nvidia does.

Nvidia’s purchase of Arm is going to be in the news for months if not years to come. Already, though, this is considered the biggest purchase ever in the semiconductor industry.