Nvidia Agrees to Buy Arm Holdings from SoftBank in $40 Billion…

Nvidia makes a strategic move to expand its footprint in the semiconductor market with its $40 billion deal of acquiring British semiconductor giant Arm Holdings. This merger will see NVIDIA’s AI computing capabilities combine with Arm’s CPU’s to create chips for next-generation technologies like IoT, robotics, self-driving cars, etc.

America’s chipmaking giant Nvidia Corporation (NASDAQ: NVDA) is all set Arm Holdings from SoftBank Group Corp (OTCMKTS: SFTBY) in a deal price worth $40 billion. Headquartered in the United Kingdom, Arm Holdings specializes in offering design architectures for mobile phones. This also includes architecture in Qualcomm Inc (NASDAQ: QCOM) chips used in a majority of Android phones and Apple iPhones.

On Sunday, September 13, Nvidia announced that Arm will continue to function as a division of Nvidia. It will “continue to operate its open-licensing model while maintaining its global customer neutrality,” Nvidia added. On the other hand, Nvidia is popular for developing chips in AI applications and high-end graphic support.

This deal will further help Nvidia expand its footprint in the market. The $40 billion deal will include a $2 billion payment while signing, $12 billion in cash, and $21.5 billion in Nvidia stock.

SoftBank has earlier bought Arm Holdings in 2016 for a $31.4 billion deal. This was seen as SoftBank’s diversification of portfolio and investment in future technologies via Arm. The British semiconductor company specializes in the Internet of Things (IoT), wireless connectivity, and everyday items like cars, refrigerators, and other devices.

This deal will give Nvidia a major boost into sectors, especially the data center chips, where Intel is largely dominating at this point. Nvidia CEO Jensen Huang called this deal as “pro-competition”. It marked “the first time in history the industry could see something that is genuinely alternative,” he said.

Nvidia doesn’t aim to change Arm’s licensing model post-acquisition. The company said that it won’t be doing anything that would cause clients to walk away. Speaking about their focus on data centers, Huang told Forbes:

“What will change is the rate of our roadmap. We know for sure that data centers and clouds are clamoring for the Arm microprocessor, the Arm CPU”.

SoftBank Needs Liquid Cash

At the time of acquiring Arm Holdings in 2016, Softbank Chairman Masayoshi Son said that he would like to have this company in their portfolio for at least 10 years. However, it looks that SoftBank is willing to liquidate this acquisition as its own books are under stress.

The Japanese banking giant has seen its finances deteriorate over the last few years. It two major investment bets – WeWork and Uber Technologies Inc (NYSE: UBER) – headed south going majorly against the company’s predictions. It looks like this move for liquidating Arm Holdings is more of getting liquid cash in hand.

Since acquiring Arm Holdings in 2016, SoftBank continued to make more investments in the semiconductor manufacturer. Thus, it is unclear how much SoftBank will actually make from this $40 billion deal. The acquisition of Arm Holdings by Nvidia might face some regulatory scrutiny considering the clause for mergers. However, since both these companies don’t compete directly with each other, the trouble won’t be much. Speaking about the deal, Simon Segars, CEO of Arm, said:

“Arm and NVIDIA share a vision and passion that ubiquitous, energy-efficient computing will help address the world’s most pressing issues from climate change to healthcare, from agriculture to education. By bringing together the technical strengths of our two companies we can accelerate our progress and create new solutions that will enable a global ecosystem of innovators”.

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