GPU maker will pay $40 billion for company that licenses its CPU designs to an array of chip manufacturers
GPU maker Nvidia is buying chip designer Arm from giant Japanese IT company SoftBank Group in a $40 billion deal that will create a powerful silicon company in the emerging world of artificial intelligence (AI).
The Lowdown: Nvidia over the weekend announced its intention to buy Arm, which had made its name designing low-power processors for mobile devices like smartphones and tablets but has since greatly expanded its reach into everything from the data center and the cloud to the Internet of Things (IoT), including autonomous vehicles.
The Details: Nvidia had been reportedly considering buying Arm for the past couple of months. Historically, it built graphics cards for video games but over the past decade has brought its GPUs into the data center, where they act as accelerators for high-performance computing (HPC) and data center servers, working alongside CPUs to improve system performance while keeping a lid on power consumption.
In recent years, the company has put a focus on AI and analytics, including with such products as its DGX servers and workstations that leverage the GPUs to accelerate deep learning applications. With Arm in the fold, Nvidia will become a company that can deal in both GPUs and CPUs, bringing together its AI platform with Arm’s large ecosystem of chip manufacturers and software makers. Arm doesn’t make CPUs; instead, it licenses its design to a broad array of companies like Qualcomm and Samsung.
The deal has been approved by the boards of directors from SoftBank, Nvidia, and Arm. Nvidia will pay SoftBank $21.5 billion in common stock and $12 billion in cash and may pay SoftBank another $5 billion in cash or stock after hitting financial targets. The GPU maker also will issue $1.5 billion in equity to Arm employees. SoftBank will keep a stake of less than 10% in the combined company.
Nvidia made a point of addressing potential concerns of Arm customers and partners, saying that Arm will continue to operate from the United Kingdom as a division within Nvidia and will continue to run its open-licensing model and be customer-neutral. It also noted that Arm customers and partners will have greater access to Nvidia products and innovations.
The GPU maker also will continue with plans that were put in place for Arm after SoftBank bought it for $32 billion in 2016 and which are expected to be completed by September 2021. In addition, Nvidia will build on Arm’s R&D efforts in the United Kingdom, including creating a global center of excellence in AI research at Arm’s campus in Cambridge. Nvidia will invest in an Arm-powered AI supercomputer, training facilities for developers, and a start-up incubator to attract research talent and create a platform for innovation and partnerships in such areas as healthcare, robotics, and self-driving cars.
Nvidia expects the deal to close within 18 months pending regulatory approval from the United States, the United Kingdom, the European Union, and China.
Not everyone is onboard with the deal. Arm co-founder called it a “disaster” and others questioned whether the investment will pay off for Nvidia and if Arm partners and customers will stick with an Arm owned by Nvidia.
The Impact: AI is becoming foundational to the future of computing as companies push to bring greater intelligence into both hardware and software. The massive growth in the amount of data being generated is a key driver – AI and machine learning are crucial to managing and analyzing the data as well as bringing greater automation to operations. The combination of Nvidia’s innovation with GPUs and Arm’s CPU capabilities and ecosystem will create a formidable company in the market and a significant challenger to Intel in the data center and HPC.
Background: The global AI market is expected to grow rapidly in the coming years. The space is a combination of established companies like Microsoft, IBM, and Google and a growing array of start-ups. Market research firm Tractica is expecting the global AI market to grow from $22.59 billion this year to $126 billion by 2025. There also are a number of AI chipmakers, from Nvidia and Intel to smaller vendors like Graphcore, Halio AI, Greenwaves, and Wave Computing.
The deal with Arm is only the latest one by Nvidia aimed at the AI market. In 2019, Nvidia bought networking company Mellanox Technologies for $6.9 billion to boost its capabilities in both AI and HPC.
The Buzz: “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’s thousands of times larger than today’s Internet of People. Our combination will create a company fabulously positioned for the age of AI. Simon Segars and his team at Arm have built an extraordinary company that’s contributing to nearly every technology market in the world. Uniting Nvidia’s AI computing capabilities with the vast ecosystem of Arm’s CPU, we can advance computing from the cloud, smartphones, PCs, self-driving cars, and robotics to edge IoT, and expand AI computing to every corner of the globe.”
“Nvida is the perfect partner for Arm,” said Masayoshi Son, chairman and CEO of SoftBank. “Since acquiring Arm, we have honored our commitments and invested heavily in people, technology, and R&D, thereby expanding the business into new areas with high growth potential. Joining forces with a world leader in technology innovation creates new and exciting opportunities for Arm. This is a compelling combination that projects Arm, Cambridge, and the U.K. to the forefront of some of the most exciting technological innovations of our time and is why SoftBank is excited to invest in Arm’s long-term success as a major shareholder in Nvidia.”
“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,” Arm CEO Simon Segars said. “Delivering on this vision requires new approaches to hardware and software and a long-term commitment to research and development. 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. My management team and I are excited to be joining Nvidia so we can write this next chapter together.”
“Arm has been at the core of our data center appliances since the beginning,” said Phil Straw, CEO of SoftIron. “Arm’s great combination of low power and balanced, high throughput I/O make it the perfect processor for building storage appliances, in particular. As the world moves toward edge infrastructure, Arm-enabled appliances will become even more highly prized for their advantages. SoftIron is excited and optimistic about the Nvidia acquisition of Arm and what it portends for the future. Nvidia’s aspirations to bolster their GPU-centric offering with Arm will prove to be a real force for innovation in the ‘x86 clone’-dominated data center landscape. Nvidia’s acquisition puts a spotlight on Arm technology and its potential to change data center architecture that we think is worthy of attention.”
On the flip side of the coin, Arm co-founder Hermann Hauser told Reuters that the deal is “a disaster for Cambridge, the U.K., and Europe. It’s the last European technology company with global relevance, and it’s being sold to the Americans.”