After weeks of speculation, Nvidia has finally confirmed it is acquiring chipmaker Arm from SoftBank for $40 billion. ARM will operate as a division of Nvidia and will keep operating its open-licensing model
SoftBank will immediately receive $2 billion in cash for signing the deal. Later it will receive another $10 billion in cash and $21.5 billion of stock in Nvidia. The deal also includes $1.5 billion in equity compensation for existing Arm employees and $5 billion in a mix of cash and stock as a performance-based earn-out.
Softbank bought stakes in ARM for $32 billion back in 2016. It has decided to sell ARM because the company is trying to clean up its balance sheet after a series of high-profile losses.
Nvidia said it will expand ARM’s UK office to establish a world-class AI research and education center. The company also has plans to build an Arm/Nvidia-powered AI supercomputer for research.
Nvidia is a big company but doesn’t exist in the smartphone market while ARM is very focused on it. ARM doesn’t make chips but it makes the design of chis that companies license and use. Apple is switching to ARM-based processors to replace Intel processors, Microsoft is working on Arm-based Surface. Samsung and Qualcomm also use Arm-based chips.
Nvidia also uses Arm for several of its system on chips. That’s why this deal was important for the company’s future. After the deal gets approval, most big rivals of Nvidia will become its customers. The deal has secured the Nvidia’s future and will help the company to compete well with Qualcomm, Intel, and AMD.
ARM is already profitable. So, it will start contributing Nvidia’s profit.
