Nvidia Announces ARM Acquisition for $40 Billion

After months of speculation and reports yesterday that a deal was imminent, Nvidia announced today that it is acquiring ARM Limited from SoftBank in a transaction valued at $40 billion. SoftBank "will remain committed to Arm's long-term success through its ownership stake in NVIDIA, expected to be under 10 percent," signaling that Nvidia will gain full control of ARM. However, the transaction does not include ARM's IoT Services Group, which remains with SoftBank.

The deal ranks as the largest semiconductor acquisition in history and marks the second-largest tech acquisition in history behind Dell's $64 billion purchase of EMC. As expected, the ARM/Nvidia deal will be subject to regulatory approval and could take up to 18 months to finalize. ARM's current licensees include industry leaders like Apple, Qualcomm, Amazon, and Samsung, among many others, and it remains to be seen how those companies will react to the acquisition. 

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Nvidia stated that it would remain committed to ARM's open licensing model and customer neutrality, all while expanding ARM's IP licensing portfolio with Nvidia's GPU and AI technology. According to the press release, ARM licensees have already shipped over 180 billion chips based on the ARM architecture (22 billion in the last year), making the addition of Nvidia IP to that portfolio an enticing proposition. 

ARM's intellectual property will also remain registered in the U.K., and Nvidia will "retain the name and strong brand identity of ARM." ARM will remain headquartered in Cambridge, UK, and Nvidia announced that it would expand ARM's R&D presence there with a new AI research and education center that will house an ARM/Nvidia-powered AI supercomputer for research.

Pending regulatory approval, Nvidia will pay SoftBank a total of $21.5 billion in Nvidia common stock and $12 billion in cash, which includes $2 billion payable at signing. SoftBank could receive an additional $5 billion in cash or common stock under an earn-out construct, meaning the payment hinges on specific financial performance targets. Additionally, Nvidia will issue $1.5 billion in equity to ARM employees, which will certainly help with employee retention in the wake of the acquisition. 

That works out to $33.5 billion in guaranteed money for SoftBank, which purchased ARM for $31.4 billion in 2016.

Nvidia will gain access to a treasure trove of IP and engineering talent that could enable the company to quickly develop custom CPU architectures for its own use, which would then further the company's broadening push into the profit-rich data center market. Nvidia has already paved the way for ARM integration with its GPUs through the recent introduction of CUDA support for ARM architectures, and now the company will have control of the underlying ARM ISA, too, enabling extremely tight integration into its solutions.  

Nvidia recently purchased Mellanox for $6.9 billion and Cumulus Networks, bringing leading networking capabilities into its portfolio. The firm also recently purchased SwiftStack, a company focused on object storage software for AI and HPC computing. 

As such, Nvidia's own line of custom ARM-based data center chips could be the final piece of the puzzle that allows it to create vertically-integrated data center-scale architectures that would deliver on Jensen Huang's vision for the future of computing. 

Nvidia also announced a webcast on September 14 at 5:30am PT that will cover the details of the acquisition. The webcast will be available on Nvidia's Investor Relations website.