Nvidia Buys Arm for $40 Billion

Nvidia announced Sunday that it has signed a definitive agreement to acquire Arm from SoftBank, in cash-and-stock transaction valued at $40 billion.

The announcement noted that SoftBank will remain committed to Arm’s long-term success through its ownership stake in Nvidia, expected to be under 10 percent.

Nvidia is framing its mega business deal with Arm as “bringing Nvidia’s own AI computing platform to Arm’s vast ecosystem.”

In his letter to Nvidia’s employees, Nvidia’s founder and CEO, Jensen Huang, wrote:

We are joining arms with Arm to create the leading computing company for the age of AI…

…Uniting Nnidia’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. 

Speculation over SoftBank’s sale of Arm to Nvidia has been percolating for months. EE Times has done its own analysis about the significance of the potential acquisition for Nvidia, Arm and the electronics industry at large in several opinion pieces:

• Could Nvidia Buying Arm Be an Ideal Match?
• Nvidia Buying Arm Would be Beyond Stupid
• Nvidia-Arm Deal: Does It Make Technological Sense?

Although SoftBank and Nvidia both officially announced the deal, many factors initially identified as challenges for Nvidia to bring the deal home still exist. These include regulatory hurdles, approvals from a host of governments (the U.S., the U.K. and China especially), and adverse customer reaction expected to be triggered by the uncertainty Nvidia brings to the Arm ecosystem.

In order to alleviate some of the concerns that have been already raised by sources in the U.K., Nvidia stressed in its announcement that it “will expand Arm’s R&D presence in Cambridge, UK, by establishing a world-class AI research and education center, and building an Arm/Nvidia-powered AI supercomputer for groundbreaking research.”

Nvidia also noted that it “will continue Arm’s open-licensing model and customer neutrality and expand Arm’s IP licensing portfolio with Nvidia technology.”

However, we do not know how Nvidia’s said plan will be perceived by Arm’s current licensees, among them some of the biggest names in the semiconductor industry today. They are Apple, Qualcomm, Broadcom, NXP, STMicroelectronics and MediaTek.

Can Nvidia create unfair advantage?
One of the key questions include: Could Nvidia gain unfair advantage as the new owner of Arm IP processor cores while serving as a neutral technology licenser?

Nvidia, in its announcement, emphasized its commitment to maintaining “customer neutrality” in its IP licensing program.

Will the highly competitive chip market take Nvidia’s promise at face value? For example, Nvidia, eager to show the company’s commitment to the U.K., has promised Arm’s Cambridge R&D operations to “invest in a state-of-the-art, Arm-powered AI supercomputer, training facilities for developers and a startup incubator, which will attract world-class research talent and create a platform for innovation and industry partnerships in fields such as healthcare, robotics and self-driving cars.”

AI technology development at Arm’s R&D in Cambridge should be a welcome sign for those in the U.K. But what we don’t know is whether much of the outcome of such R&D activities will be kept by Nvidia or it will be shared with Arm’s licensees in the form of IPs. Take an example of Arm licensees in the field of self-driving cars. Many SoC designers including Qualcomm and NXP are competing head to head against Nvidia for sockets in the next-generation vehicle design wins.

What about Arm China?
No matter who was going to buy Arm, the ongoing boardroom fight between SoftBank and Arm’s Chinese joint venture was going to be an impediment to any sale. The internal fight was over the removal of Allen Wu, CEO of Arm China. Despite Arm U.K.’s claim earlier this year that he was fired, Wu refused to depart, claiming that he still has control over Arm China.

The official announcement from Nvidia/SoftBank did not address the issue.

We discussed the pros and cons of Nvidia buying Arm in our August 7 podcast.

All said and done, Nvidia-Arm deal does make sense when looked at purely from Nvidia’s standpoint. Nvidia’s founder and CEO Jensen Huang clearly wants to rule the data center market. Indeed, the company is well along that road; it reported record data-center revenue in its latest quarterly results. Acknowledging those ambitions, our London correspondent Nitin Dahad opined as follows:

An acquisition by Nvidia, though potentially disruptive for some industry players, would give Nvidia what it needs to be ‘king of chips’ as one newspaper said this week, giving Nvidia the whole stack, the GPU, CPU, networking, and the software.

When we interviewed earlier Mike Demler, senior analyst at the Linley Group, he explained the potential benefits of combining Arm CPUs with Nvidia’s GPUs as follows:

You’d have the leading power-efficient CPU platform with the leading platform for GPU compute and AI training. Jensen (Huang) often talks about the advances their GPUs have made compared to Moore’s Law, and how they’ve fostered a new computing paradigm. And after years trying, Arm licensees are finally making some inroads into traditional x86 strongholds, such as high-performance computer (HPC) and PCs.

He concluded:

So putting all competitive, legal, and technical obstacles aside for a moment, from a strategic point of view, Arm could help Nvidia create a more powerful computing platform based on the combination of their technologies, and Arm’s expertise in IP licensing would help proliferate that platform.

Similarly, Kevin Krewell, principal analyst at Tirias Research, noted that, if consummated, the deal “would give Nvidia control over the most pervasive instruction set on the planet. It would allow Nvidia to drive its AI cores and CUDA ecosystem into the Arm ecosystem.”

Certainly, there appears to be upside for Nvidia. If you have $40 billion to burn, you should be able to get anything you want.  But remember, once this deal — called “reckless” by our colleague Bolaji Ojo — is done, it will stand as “the most audacious move by Huang as the CEO of Nvidia,” according to Krewell.

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