What Could an NVIDIA Acquisition of ARM Mean for Semiconductors?

The News: Nvidia Corp. NVDA, +1.06% is pursuing a deal to pick up SoftBank Group Corp.’s 9984, +0.43% U.K.-based chip designer that the Japanese conglomerate acquired four years ago, according to a report Wednesday. Bloomberg News reported that Nvidia approached SoftBank “in recent weeks” over a deal for Arm Ltd. Earlier in the month, there were reports that SoftBank was looking to sell or spin off Arm in an initial public offering. SoftBank bought Arm in 2016 for $32 billion. Nvidia shares were last up 0.7% at $416.14 in Wednesday trading. (Via MarketWatch).

Analyst Take: Earlier in the year, I wrote about NVIDIA as the next power broker in AI. The company has continued to be not only aggressive, but disruptive in the space–the launch of its newest A100 series gave further merit to its trajectory in AI.

However, NVIDIA has largely been viewed as a specialized chip builder for AI and HPC. This hasn’t stopped its stock from exploding and the gamers that benefit from its GPUs have lended affinity and credibility to the company’s products, but for certain parts of the tech stack, NVIDIA had largely stayed away.

The potential acquisition of ARM is interesting as ARM’s licensing and custom silicon business builds chips for datacenter, mobile, IoT and PCs. These are areas where NVIDIA is largely absent, but this acquisition could instantly put NVIDIA in the conversation.

Products like Windows on ARM has begun to gain momentum with Microsoft, Lenovo and ASUS using the platform as an option for consumers. This has fueled the ACPC movement and led to growing interest in ACPCs. NVIDIA would potentially find itself competing with x86 directly, which at this point it still remains absent. This gives the company a good reason to pursue such an acquisition. However, the entire business model of ARM is very different than NVIDIA today, so that is something to keep in mind.

Overall Impressions of the Rumor of an NVIDIA Acquisition of ARM.

At first blush, for me, it’s a game changer. I have some small reservations about the conflicting business models, but I feel like Jensen Huang and the team at NVIDIA could quickly overcome those conflicts.

With the acquisition of ARM, NVIDIA instantly expands beyond the AI and HPC company, and becomes an end-to-end provider of chips for mobile, PC, datacenter, IoT, Edge and more. This puts the company on a more level playing field with Intel and gives more credibility to the Windows on ARM movement.

I’m genuinely intrigued to see where this goes. One of the most interesting rumors in M&A that I have heard in some time.

Futurum Research provides industry research and analysis. These columns are for educational purposes only and should not be considered in any way investment advice.

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Daniel is the CEO of The Futurum Group. Living his life at the intersection of people and technology, Daniel works with the world’s largest technology brands exploring Digital Transformation and how it is influencing the enterprise.

From the leading edge of AI to global technology policy, Daniel makes the connections between business, people and tech that are required for companies to benefit most from their technology investments. Daniel is a top 5 globally ranked industry analyst and his ideas are regularly cited or shared in television appearances by CNBC, Bloomberg, Wall Street Journal and hundreds of other sites around the world.

A 7x Best-Selling Author including his most recent book “Human/Machine.” Daniel is also a Forbes and MarketWatch (Dow Jones) contributor.

An MBA and Former Graduate Adjunct Faculty, Daniel is an Austin Texas transplant after 40 years in Chicago. His speaking takes him around the world each year as he shares his vision of the role technology will play in our future.


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