Nvidia and SoftBank Group Corp. (SBG) have announced an agreement under which Nvidia will acquire Arm Limited from SBG and the SoftBank Vision Fund in a transaction valued at $40 billion.
As part of Nvidia, “Arm will continue to operate its open-licensing model while maintaining the global customer neutrality that has been foundational to its success, with 180 billion chips shipped to-date by its licensees,” Nvidia said in its announcement.
The acquisition, scheduled for completion within 18 months, would diversify Nvidia’s growing and formidable position in HPC. Its GPU processors help power the second and third most powerful supercomputers, Summit and Sierra, according to the Top500 ranking of the world’s most powerful systems, along with 50 percent of the new systems on the latest Top500 list, according to Nvidia. In addition, earlier this year, Nvidia completed the acquisition of high performance networking gear provider Mellanox for $7 billion.
Coupled with the attainment of Arm-powered Fugaku as the world’s no. 1-ranked system, Nvidia’s Arm purchase would be another step in the execution of its ambitious strategy to accelerate computing in any technology sector it touches, including gaming, autonomous vehicles, IT, AI, scientific computing and HPC.
Nvidia CEO Jensen Huang said Arm will remain headquartered in Cambridge (UK), adding that “We will expand on this great site and build a world-class AI research facility, supporting developments in healthcare, life sciences, robotics, self-driving cars and other fields. And, to attract researchers and scientists from the U.K. and around the world to conduct groundbreaking work, Nvidia will build a state-of-the-art AI supercomputer, powered by Arm CPUs. Arm Cambridge will be a world-class technology center.”
This morning on CNBC’s Squawk Box, Huang called Arm “an extraordinary company, this is the company that builds the world’s most popular CPU, it has built 180 billion units over its history, 22 billion of it just last year. And it’s there in everything, they power computers of all different types of shapes from supercomputers, the fastest supercomputer in the world, all the way down to smartwatches and smart thermostats… I’m just so excited that the opportunity came up.
“And so now we’ve combined, the most popular (and) the fastest ecosystem CPU in the world with the world’s leading AI computing company. The vision is this: We want to build a computing company for the age of AI. If you think about all the chips that have been shipped 22 billion chips shipped last year, we know very well going forward, that AI will be infused into them, that accelerated computing would have to augment the CPUs because Moore’s Law really has come to an end. And so those things play right into our wheelhouse. And if we could leverage their business model, if we could stand on the network that they’ve they’ve created and take the technology we’ve invented and put it into that channel and make them available to their thousands of partners, the economics, for us would be incredible.”
Combined with Mellanox networking, Huang said, Nvidia sees “an opportunity here to build the next major data center and the next major computing platform together. And so we have all the pieces between us — Mellanox, Nvidia’s complete stack of software and systems capability, and now with Arm’s CPU core, we can create a significant and viable alternative in the marketplace.”
He added that the combination of the three organizations’ technologies “could directly serve a $250 billion TAM, from the cloud all the way out to the edge.”
Combined with (Arm CPUs and) Mellanox networking, Huang said, Nvidia sees “an opportunity here to build the next major data center and the next major computing platform together. And so we have all the pieces between us — Mellanox, Nvidia’s complete stack of software and systems capability, and now with Arm’s CPU core, we can create a significant and viable alternative in the marketplace.”
SoftBank purchased Arm four years ago. Following the closing of the transaction, Nvidia said it intends to retain the Arm name and brand identity. Arm’s intellectual property will remain registered in the U.K.
Under the terms of the transaction, which has been approved by the boards of directors of Nvidia, SBG and Arm, Nvidia will pay to SoftBank a total of $21.5 billion in Nvidia common stock and $12 billion in cash, which includes $2 billion payable at signing. The number of Nvidia shares to be issued at closing is 44.3 million, determined using the average closing price of Nvidia common stock for the last 30 trading days. Additionally, SoftBank may receive up to $5 billion in cash or common stock under an earn-out construct, subject to satisfaction of specific financial performance targets by Arm.
Nvidia said it will also issue $1.5 billion in equity to Arm employees.
Nvidia intends to finance the cash portion of the transaction with balance sheet cash. The transaction does not include Arm’s IoT Services Group. The transaction is expected to be immediately accretive to Nvidia’s non-GAAP gross margin and non-GAAP earnings per share.
The proposed transaction is subject to customary closing conditions, including the receipt of regulatory approvals for the U.K., China, the European Union and the United States. Nvidia will conduct a webcast at 5:30 a.m. PT on Monday, September 14, to discuss the transaction. The webcast is available on Nvidia’s Investor Relations website at https://investor.nvidia.com/.
