Record buyout among tech companies: Nvidia acquired chipmaker ARM for $ 40 billion

Nvidia will pay $ 21.5 billion in stock and $ 12 billion in cash for the UK-based chip designer (Photo: Alex Kraus / Bloomberg).

North American technology Nvidia, manufacturer of video accelerator boards and leader in artificial intelligence (AI), acquired Arm, the chip division of the Japanese conglomerate SoftBank for USD 40,000 million.

The firm founded in 1993 with headquarters in California to pay $ 21.5 billion in stock and $ 12 billion in cash for the UK-based chip designer, including a $ 2 billion payment at signing, as reported in a statement.

It is the second-largest purchase in the history of the technology sector, surpassed only by the purchase of EMC by Dell for $ 67,000 million, and the largest of a semiconductor and processor company.

Both companies said in a statement that SoftBank could receive an additional $ 5 billion in cash or shares if the performance of Arm meets certain goals. In addition, an extra USD 1.5 billion will be paid to employees of Arm in shares of Nvidia.

“The combination brings together the leading AI computing platform from Nvidia with the vast ecosystem of Arm to create the leading computing company for the era of artificial intelligence, accelerating innovation while expanding into large, high-growth markets, “the US firm said in the statement.

Both companies said in a statement that SoftBank could receive an additional $ 5 billion in cash or shares if Arm’s performance meets certain targets. Additionally, an extra $ 1.5 billion will be paid to Arm employees in Nvidia shares.

While, SoftBank rose 10% in the stock market due to the news of the agreement and the renewed conversations for the company to stop listing.

The importance of Arm, which is based in Cambridge, far exceeds its revenue, generated by the license of chip fundamentals and the sale of processor designs. Its technology is at the heart of the more than 1 billion smartphones sold annually.

“Nvidia will invest in a next-generation ARM-powered artificial intelligence supercomputer, developer training facilities and a startup incubator, attracting world-class research talent and creating a platform for industry partnerships and innovation. in fields such as health, robotics and autonomous vehicles ”, stated the company.

Why did Nvidia acquire Arm

The acquisition of Arm by Nvidia is driven by the goal of bringing artificial intelligence to everything that has a switch, according to Nvidia’s CEO, Jen-Hsun Huang.

Having succeeded in selling the graphics chips to data center owners to speed up image recognition and language processing, Huang said he wants to ensure that his technology is included in all kinds of objects, from autonomous vehicles to smart readers.

Nvidia was known as a manufacturer of video accelerator boards for multipurpose and home computers, but its business diversified into artificial intelligence in areas such as autonomous vehicles, and now it is turning to operations in the Cloud.  REUTERS / Robert Galbraith
Nvidia was known as a manufacturer of video accelerator boards for multipurpose and home computers, but its business was diversifying until it reached artificial intelligence in areas such as autonomous vehicles, and now it is turning to operations in the Cloud. REUTERS / Robert Galbraith

Nvidia’s down payment represents a small premium to the $ 31.4 billion SoftBank paid for the Arm acquisition in 2016., previously the largest deal in the semiconductor industry. Also, the Japanese company is expected to own less than 10% of Nvidia after the transaction.

Regulatory approvals could be a problem. The companies said authorizations are needed from China, the UK, the European Union and the US, and that the process could take up to 18 months.

In that sense, China’s approval could be particularly difficult due to growing trade tensions with the US.

SoftBank rose 10% in the stock market due to the news of the agreement and the renewed conversations for the company to stop listing.  REUTERS / Issei Kato / File Photo
SoftBank rose 10% in the stock market due to the news of the agreement and the renewed conversations for the company to stop listing. REUTERS / Issei Kato / File Photo

It should be remembered that Nvidia was known as a manufacturer of video accelerator boards for multipurpose and home computers, but his business was diversifying until he reached artificial intelligence in areas such as autonomous vehicles, and now he is turning to operations in the Cloud.

While, Arm is a company specialized in microprocessors created in 1990 in England. The firm has a share of the world market in the smartphone sector. Its chips are used in sensors, in the video game industry and in the field of artificial intelligence and data centers.

Meanwhile he SoftBank Group It is composed of SoftBank Group Corp. a holding company that includes telecommunications, internet services, artificial intelligence, smart robotics, internet of things, and clean energy technology providers.

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