Nvidia made an approach in recent weeks about a potential deal for Cambridge, England-based Arm, according to the people. Other potential bidders could also emerge, the people said, asking not to be identified because the information is private.
SoftBank, led by billionaire Masayoshi Son, is exploring options to sell part or all of its stake in Arm through a private deal or public stock listing, Bloomberg News reported this month. Nvidia’s interest may not lead to a deal, and SoftBank may still opt to pursue a listing, the people said. Representatives for SoftBank, Arm and Nvidia declined to comment.
A deal for Arm could become the biggest-ever acquisition in the chip industry, according to data compiled by Bloomberg. Arm is owned by SoftBank and its $100 billion Vision Fund. The Japanese group bought Arm, which at the time was the U.K.’s largest listed technology company, for about $32 billion in 2016.
Since that deal, the Philadelphia Stock Exchange Semiconductor Index has rallied 185% as investors pour money into an industry they’re betting will grow rapidly, fueled by new markets and technologies such as automotive and artificial intelligence.
Shares of Nvidia have risen almost eightfold over the same period, giving it a market value of about $254 billion. They rose about 1% in New York trading Wednesday. The Santa Clara, California-based company has segued its dominance of graphics chips used by gamers into new areas such as data center AI processing, as well as a foothold in the nascent market for systems that will run self-driving cars.
Those moves have made the company a bigger threat to a broader range of companies, including Intel Corp., Qualcomm Inc. and Advanced Micro Devices Inc. — all of which license Arm’s technology. Earlier in July, Nvidia briefly surpassed Intel in market value.
SoftBank previously owned a stake in Nvidia, having quietly amassed $4 billion of shares in 2017, people with knowledge of the matter said at the time. The Japanese firm said in early 2019 that the Vision Fund had sold off all of its Nvidia holding.
Arm sells semiconductor designs and also licenses the fundamentals of how chips communicate with software, known as an instruction set. That blueprint underpins much of modern electronics and is the core value of the company. Even some companies that design their own chips, such as Apple Inc., do so using Arm’s instruction set.
As part of the sale process, SoftBank approached Apple to gauge its interest in acquiring Arm, according to people familiar with the matter. The two firms had preliminary discussions, but Apple isn’t planning to pursue a bid. That’s because Arm’s licensing operation would fit poorly with Apple’s hardware and software business model. There may also be regulatory concerns about Apple owning a key licensee that supplies so many rivals. An Apple spokesman declined to comment.
Still, the Cupertino, California-based technology giant has a vested interest the fate of Arm. The chip designer’s technology is an important component of the more than 2 billion custom processors that Apple has shipped in iPhones and other devices over the past decade. Mac computers will start relying on the technology later this year.
SoftBank has been selling down some of its prized assets, including part of its stake in Alibaba Group Holding Ltd. and a large chunk of its holdings in wireless carrier T-Mobile US Inc. The goal is to buffer cash reserves to help withstand the economic effects of spread of Covid-19. It’s also under pressure from Paul Singer’s activist investment firm Elliott Management Corp., which has called on the company to boost stockholder value through buybacks and governance changes.
When SoftBank bought Arm, the two unveiled a strategy to rapidly increase the chip technology company’s reach by going on a hiring binge and increasing its chip-design efforts. The plan, according to Arm Chief Executive Officer Simon Segars, was to prioritize expansion and investment before eventually reining in costs in preparation for a return to the public markets.
Any customer trying to acquire Arm would trigger regulatory scrutiny. Other companies using its technology would likely oppose a deal and demand assurances that a new owner would continue to provide equal access to Arm’s instruction set. Such concerns resulted in a neutral company — SoftBank — buying Arm the last time it was for sale.