Morning Blast: Chip Desinger Arm Wants Nvidia Among IPO Investors

Once upon a time (September 2020), Nvidia Corp. (NASDAQ: NVDA) offered to pay $66 billion (including debt) to acquire U.K.-based chip designer Arm from SoftBank. In February 2023, Nvidia dropped the idea after the U.S. Federal Trade Commission sued to stop the sale. But Arm and Nvidia haven’t given up.

The Financial Times reported Wednesday morning that the two companies have discussed having Nvidia participate as an anchor investor in Arm’s planned IPO. The FT cited several unnamed sources who said a listing in New York is possible by September.

Arm’s low-power, high-performing chip designs are used by hundreds of companies, including Apple, Qualcomm, and Samsung. Nearly every smartphone in the world has an Arm-based chip.

The ubiquity of the Arm design is what scuppered the Nvidia buyout bid. If Nvidia had been allowed to acquire one of the world’s leading designers, it could have held a knife to the throat of its rivals by raising prices or limiting the technology it would produce for its customers/rivals.

Nvidia is said to be seeking a valuation of Arm in the range of $35 to $40 billion. Arm is looking for a valuation of around double that. SoftBank paid $32 billion to acquire Arm in 2016.

SoftBank is probably closer to what the Arm’s worth, but it would like to have Nvidia as a prominent anchor investor and may have to lower its sights. If the FT’s sources are right about Nvidia’s valuation, the chipmaker’s notion of what Arm is worth borders on delirious.

Nvidia’s AI chips (actually souped-up graphics processing units, GPUs) have set a high bar for investors valuing an IPO. As one source told the FT, “AI will be every third word in the offering document. Nvidia is so important as its involvement implies AI.”

If Nvidia wanted a lower price, it shouldn’t have been so successful. Wait, what?

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