Nvidia to Buy Arm for $40 Billion, Pose Big Challenge to Intel, AMD

A blockbuster deal – Nvidia buying Arm for $40 billion – promises to reshape compute and artificial intelligence (AI) platforms.

Nvidia and Arm parent Softbank Group announced the agreement late Sunday evening. It is among the largest ever by a semiconductor manufacturer. Softbank, the conglomerate holding company, acquired Arm in 2016 for $32 billion.

The combination of Nvidia, known for its GPUs, and Arm’s system-on-a-chip processors, could mount a formidable challenge to Intel. It would also be a threat to AMD, which offers its own accelerators and CPUs.

Arm has licensed its CPU chip designs to more than 1,000 partners. Arm’s CPUs power most mobile phones and tablets today, and increasingly PC laptops including Microsoft’s new Surface X. But in recent years, Arm has also pushed into the data center with new power-optimized server CPUs and supercomputing.

While Arm itself doesn’t manufacture chips, it licenses its architecture to almost every leading player. Arm claims 180 billion chips have shipped in devices produced by its licensees including Amazon, Apple, Huawei, Qualcomm and Samsung. In addition to impacting the competitive future of compute and infrastructure, Arm and Nvidia have large developer partner communities.

Nvidia founder and CEO Jensen Huang told both companies’ employees that it will keep that licensing model.

“We will maintain its open-licensing model and customer neutrality, serving customers in any industry, across the world, and further expand Arm’s IP licensing portfolio with Nvidia’s world-leading GPU and AI technology,” Jenen wrote in a letter to employees of both companies.

If Huang can keep satisfy the U.K. and keep the Arm team happy, the move by Nvidia to acquire Arm “will be a strong endorsement of Nvidia’s strategy to be the platform for the next internet,” according to a LinkedIn comment by Cisco product manager Vernon Turner. “All of the pieces are coming together.”

Reaching a Broader Market

Almost every PC vendor offers Nvidia’s GPUs, or graphics processing units, in some of its high-performance desktops, laptops and workstations. Many server manufacturers and network providers are available with Nvidia GPUs as well. In recent years, Nvidia has expended its technology into the cloud, accelerating performance for AI-intensive capabilities. In April, Nvidia completed its $7 billion acquisition of Mellanox, which provides Ethernet, InfiniBand storage and network interconnect technology.

Huang told analysts on Monday that the combination will position the company to accelerate that push.

“By combining the world’s most popular CPU with Nvidia’s AI computing platform, we’re creating the leading computing company for the age of AI,” Huang said.

“Arm will definitely help Nvidia technology reach to broader market, especially edge AI,” Microsoft silicon architect Jaymin Jasoliya noted on LinkedIn.

But the companies acknowledged it could take up to 18 months to complete, pending regulatory approvals. It’s not a slam dunk that the deal will pass muster in China, the U.S. or England, where Arm is based. Two years ago, the Trump administration nixed Broadcom’s $117 billion bid for Qualcomm. Indeed, licenses and competitors may challenge the deal.

Softbank would get a $2 billion breakup fee if the deal doesn’t close. If the deal does clear all hurdles, the agreement calls for Nvidia to pay Softbank $12 billion in cash and $21.5 billion in Nvidia stock for Arm.

Analysts Weigh In

Patrick Moorhead, founder and lead analyst at Moor Insights & Strategy, spoke with Huang and Arm CEO Simon Segars. Moorhead shared his observations in a Forbes post.

Moor Insights’ Patrick Moorhead

“Nvidia brings incredible capitalization to Arm which, as we have seen since its Softbank acquisition, Arm has increased its market presence and competitiveness,” Moorhead noted. “Softbank investment has enabled Arm’s thrusts in the data center, automotive, IoT and NPU markets. I believe the ladder can only make it stronger as long as it sticks with its commitment to let Arm do what they do best, which is creating and licensing IP in a globally-neutral way which it is committing.”

Bob O ‘Donnell, president and chief analyst at TECHnalysis Research, agreed.

“The truth is, this acquisition would be a brilliant move for Nvidia,” he noted. “Because it would extend the company’s level of influence and exposure to many areas of the tech market that it has never been able to reach.”