Its officially over, Nvidia gets a 20-year license and SoftBank $1.25B
Back in September 2021, we have addressed that Nvidia’s acquisition of Arm is very uncertain. Even back in September 2020, when the deal was officially announced, I raised serious concerns that the deal was good for Nvidia and bad for everyone else.
Nvidia is a spectacular company, but having control over Arm would potentially bring big trouble for the competition. Nvidia thrived as an early adopter of AI training hardware and software and will continue to thrive.
There was strong opposition from the EU, the UK, and especially China. US FTC took an aggressive step to sue Nvidia for stopping the deal. China would most likely block the deal in the end, but it would let Nvidia suffer for at least a year or two more. We learned from Qualcomm’s failed acquisition of NXP that sometimes it’s better to walk away and make your path. But parties SoftBank (ARM) and Nvidia will gain something.
Companies including Qualcomm, AMD, Tesla, and many others were not in favor of the deal as it would potentially give Nvidia too much control over what might be the world’s most important set of tech IP.
Today makes the sad day for Nvidia but bright for the rest of the industry, at least most of them. Nvidia did gain some support for its acquisition, including Broadcom, Marwell, and MediaTek were publicly supporting the deal. Apparently, this was not enough, especially after the FTC lawsuit.
“Arm has a bright future, and we’ll continue to support them as a proud licensee for decades to come,” said Jensen Huang, Founder and Chief Executive Officer of NVIDIA. “Arm is at the center of the important dynamics in computing. Though we won’t be one company, we will partner closely with Arm. The significant investments that Masa has made have positioned Arm to expand the reach of the Arm CPU beyond client computing to supercomputing, cloud, AI and robotics. I expect Arm to be the most important CPU architecture of the next decade.”
“Arm is becoming a center of innovation not only in the mobile phone revolution, but also in cloud computing, automotive, the Internet of Things and the metaverse, and has entered its second growth phase,” said Masayoshi Son, Representative Director, Corporate Officer, Chairman & Chief Executive Officer of SoftBank Group Corp. “We will take this opportunity and start preparing to take Arm public, and to make even further progress.”
Mr. Son continued, “I want to thank Jensen and his talented team at NVIDIA for trying to bring together these two great companies and wish them all the success.”
In accordance with the terms of the agreement, Soft Bank Group will retain the $1.25 billion prepaid by NVIDIA, which will be recorded as profit in the fourth quarter, and NVIDIA will retain its 20-year Arm license. On the same day, announced preparation for a public offering of Arm within the fiscal year ending March 31, 2023.
Nvidia will walk away with a bruised ego, exceptionally inflated stock value, and the ability to understand the ways of legislation in the world a bit better. Jensen’s Nvidia underestimated its power in the DC and especially in China.
Insightful financial analysts will see this brake up as good for Nvidia, despite the $1.25B bill, as 20 years of Arm means a lot.