Record chip deal lands Nvidia in crosshairs of US-China tensions

Image via NVIDIA

It was announced on Sunday that Nvidia intends to buy Arm, who supply chips to companies like Samsung and Apple, for $40bn off their current owner, Japan's Softbank.

Shares in Nvidia rose over 5% in pre-market trade in NY.

At any rate, assuming all goes through, Nvidia will be investing more into ARM's headquarters in Cambridge, UK.

"We are joining arms with Arm to create the leading computing company for the age of AI", NVIDIA founder and CEO Jensen Huang wrote in an open letter to employees last night. "Someday, trillions of computers running AI will create a new internet - the internet-of-things - thousands of times bigger than today's internet-of-people".

The combination brings together Nvidia's AI computing platform with Arm's ecosystem to create a computing company for the age of artificial intelligence, and SoftBank will remain committed to Arm's long-term success through its ownership stake in Nvidia, expected to be under 10%. After the deal, Nvidia will own ARM and SoftBank will be the largest shareholder of Nvidia stock.

The deal will have NVIDIA paying 12 billion US Dollars in cash, which includes 2 billion US Dollars payable at signing, and giving out 21.5 billion US Dollars worth of NVIDIA's stock to SoftBank.

The cash pile is a significant achievement for SoftBank, which half a year ago was struggling with a stock price in free fall and billions of dollars in write-downs on investments that turned sour, such as in US office-share company WeWork.

What An Impact This Deal Will Have On Nvidia?

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Plus, he added, he wanted to keep Pfizer out of politics, a tall task for a pharma company on any day, but especially during this pandemic.

Arm will remain headquartered in Cambridge, UK. But NVIDIA plans to expand Arm's research & development, build a new "AI supercomputer for groundbreaking research" using Arm and NVIDIA technology, and work on technologies for "computing from the cloud, smartphones, PCs, self-driving cars, robotics, 5G, and IoT". He described Arm as "the Switzerland of the semiconductor industry" because it deals in an "even-handed way" with over 500 licensees, a position Hauser said would be compromised by the deal. Nvidia aims to turn it into a "world-class AI research facility", intending to build a new AI supercomputer powered by Arm CPUs in order to attract highly skilled researchers from around the world.

"Prior to its 2016 acquisition by Softbank, ARM was seen as one of the UK's technological jewels, and approving its sale to an overseas buyer was politically sensitive".

And seller SoftBank, the vituperated "Nasdaq Whale" - is it?; more here in case you missed it - is.

The chief executives of Nvidia and Arm told Reuters in an interview that Nvidia will retain Arm's United Kingdom headquarters - which exempt it from many USA export control laws - and open licensing model.

This shouldn't have any impact on Apple, despite the companies move to Arm architecture for the design of its Mac chips.

All of this is subject to obtaining regulatory approval from the UK, China, the European Union and the United States, with full completion expected in around 18 months.

It's a deal which the man who founded ARM says is a disaster. They've been in the processor business since the 1980s, and if you've used a computer in your life, you've likely used something from Arm.

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