Nvidia To Acquire Arm In $40 Billion Chip Mega-Deal

The GPU powerhouse ended rumors Sunday night with the announcement that it plans to acquire British chip designer Arm from Japanese owner SoftBank group in a deal that Nvidia CEO Jensen Huang says would create the ‘world’s premier computing company.’

Nvidia announced that it plans to acquire British chip designer Arm in a $40 billion mega deal that CEO Jensen Huang said will turn Nvidia into the “world’s premier computing company.”

The deal, announced Sunday, confirms rumors starting in July that Nvidia was interested in buying Arm from its Japanese owner, SoftBank Group, which had reportedly been exploring a sale or initial public offering for the chip design business it acquired in 2016 for $32 billion.

By acquiring Arm, Nvidia would have the underlying technologies for the GPU, CPU and network in the data center and beyond, allowing the chipmaker to more tightly integrate those technologies and expanding upon what Nvidia has already started to do with its $8 billion acquisition of interconnect vendor Mellanox Technologies from earlier this year, according to one Nvidia partner who spoke to CRN last month.

In a media and analyst call Sunday night, Huang said the acquisition will allow the two companies to combine their research, development and engineering capabilities to accelerate the development of technology for “Arm’s vast ecosystem,” including server CPUs.

“What we want to do is we want to accelerate development of the server CPU roadmap and by doing so the customers are going to be thrilled by it,” he said.

Under the deal, Nvidia would also own the underlying CPU technology for most of the world’s smartphones as well as millions of IoT devices. Arm also licenses CPU technology for laptops.

The acquisition is expected to close in roughly 18 months, but it will likely face heavy regulatory scrutiny as it requires approval in the United States, United Kingdom, European Union and China. The acquisition will not include Arm’s IoT Services Group, which the chip designer had previously planned to spin out into new independent entities owned by SoftBank.

Responding to a question about regulatory concerns, Huang said the Nvidia and Arm are “completely complementary,” just in the same way that Nvidia and Mellanox are.

“Nvidia doesn’t design CPUs. We have no CPU instruction set. Nvidia doesn’t license IP to semiconductor semiconductor companies,” he said. “In that very way, we’re not competitors, and we have every intention to add IP. And also, unlike Arm, Nvidia does not participate in the cell phone market.”

Huang said Arm will remain committed to its open-licensing model while maintaining its neutrality with customers, which includes Apple and Samsung as well as Nvidia rivals AMD and Intel.

“We love Arm’s business model. In fact we intend to expand Arm’s licensing portfolio with access to Nvidia technology. Both our ecosystems will be enriched by this combination,” Huang said.

The chipmaker said that Arm will retain its name and brand identity and that its intellectual property will remain registered in the U.K. Nvidia also plans to expand Arm’s research and development presence in the U.K. in addition to establishing a new global center of excellence in AI research at Arm’s Cambridge headquarters and investing in an Arm-based AI supercomputer, training facilities for developers and a startup incubator.

As part of the deal, Nvidia will pay SoftBank a total of $21.5 billion in Nvidia common stock and $12 billion in cash, which includes $2 billion that will be paid at the signing of the deal. SoftBank will also be eligible to receive up to $5 billion in cash or common stock, subject to Arm achieving specific financial performance targets. In addition, Nvidia will give $1.5 billion in equity to Arm employees.

One system builder told CRN on condition of anonymity that the news of the acquisition of Arm by Nvidia for now is leading to more questions than answers.

For instance, the system builder said the custom system industry for now currently has really only one OEM, Taiwan-based Gigabyte, building Arm-based solutions, but that could change.

“What happens with the other competitors?” the system builder said. “Will they follow Gigabyte? That could make Intel and AMD nervous. Nvidia could also build its DGX systems with Arm, and not Intel or AMD. And if Nvidia did so, that could cause a DGX systems price drop.”

The other major question is what happens to Intel’s roadmap going forward if Nvidia invests heavily in Arm development, the system builder said.

“Some Intel products are already delayed,” the system builder said. “For instance, the new Intel Xeon Scalable Processors are now available in limited options for four-socket and eight-socket systems. But when will the dual-socket versions be available? That’s the sweet spot.”

It will also be interesting to see what happens to Arm in China, where the operation is separate from Arm’s global operations, the system builder said.

“Also, will China even approve the acquisition?” the system builder said. “No one knows.”

Additional reporting by Joseph F. Kovar.