SoftBank Group revealed on Monday that it has agreed to sell chip designer Arm to Nvidia in a deal valued at $40 billion and buy 8 percent stake in Nvidia.
Nvidia will pay SoftBank $21.5 billion in shares and $12 billion in cash, including $2 billion on signing. The deal, which was reported by The Wall Street Journal earlier, will see SoftBank and the $100 billion Vision Fund, which has a 25 percent stake in Arm, take a stake in Nvidia of between 6.7 percent and 8.1 percent.
SoftBank could also be paid an additional $5 billion in cash or shares depending on the chip designer’s business performance, with Arm employees to be paid $1.5 billion in Nvidia shares.
SoftBank purchased the British chip technology firm Arm for $32 billion four years ago. SoftBank CEO Masayoshi Son has lionised the potential of Arm but is slashing his stakes in major assets to raise cash.
Arm will remain headquartered in Cambridge. Arm build an AI research facility, supporting developments in healthcare, life sciences, robotics, self-driving cars and other fields, said Simon Segars, CEO of Arm.
As part of NVIDIA, Arm will continue to operate its open-licensing model while maintaining the global customer neutrality that has been foundational to its success, with 180 billion chips shipped to-date by its licensees. Arm partners will benefit from both companies’ offerings, including NVIDIA’s innovations.
SoftBank executives, frustrated at the group’s share performance, have held early stage talks about taking the Japanese technology group private, a source told Reuters. Those talks could gain momentum following the Arm sale.
The deal, which is subject to regulatory approvals including in Britain, the United States and China, will alter the semiconductor landscape by putting a long-neutral technology vendor to Apple and others under the control of a single player, Reuters reported.
Nvidia CEO Jensen Huang said he will retain Arm’s neutral licensing model and expand it by licensing out Nvidia intellectual property for the first time.
Huang said a new artificial intelligence research center will be built at Arm’s Cambridge headquarters. “Cambridge is going to be a site of growth,” Huang said.
Nvidia began as a graphics chip designer and has expanded into products for areas including artificial intelligence and data centers.
The Arm acquisition will put Nvidia into more intense competition with rivals in the data center chip market such as Intel and Advanced Micro Devices (AMD) because Arm has been developing technology to compete with their chips. The transaction does not include Arm’s IoT Services Group.
The deal gives Nvidia control of technology from Arm that could be used to make its own central processor chips, doubling down on Nvidia’s strategy of buying up technologies in parts of the booming data center business where it does not currently play.
Earlier in April, Nvidia completed its purchase of Israel-based Mellanox, which makes high-speed networking technology that is used in data centers and supercomputers.
Arm does not make chips but instead has created an instruction set architecture – the most fundamental intellectual property that underpins computing chips – on which it bases designs for computing cores.
Arm licenses its chip designs and technology to companies like Qualcomm, Apple and Samsung Electronics, which in turn use the technology in their chips for smartphones and other devices.
Apple’s forthcoming Mac computers will use Arm-based chips.
