Nvidia-Arm deal announced

Arm’s sale to Nvidia has been announced this morning.

“ARM will remain headquartered in Cambridge,” says Jen Hsun Huang Nvidia’s CEO, “We will expand on this great site and build a world-class AI research facility, supporting developments in healthcare, life sciences, robotics, self-driving cars and other fields.”

Nvidia will pay $21.5 billion in Nvidia stock and $12 billion in cash. Another $5 billion will be paid if specified targets are met. It will follow with up to a further $5bn in cash or stock if certain targets are met.

On top of that, Nvidia will also issue $1.5 billion worth of shares to Arm staff.

The speculation is that Nvidia will change Arm’s business model from being a licensor of CPU IP to the Intel business model of being a supplier of discrete proprietary CPUs.

This could, potentially, make Arm a much more lucrative business. Arm had revenues of $1.6 billion last year and was unprofitable, whereas Intel had 2019 revenues of $72 billion for a profit of $42 billion.

However Huang says: “Arm’s business model is brilliant. We will maintain its open-licensing model and customer neutrality, serving customers in any industry, across the world, and further expand Arm’s IP licensing portfolio with Nvidia’s world-leading GPU and AI technology.”

However Arm customers seeing Arm sold to another customer may question the neutrality of Nvidia’s approach to licensing and start to switch to a genuinely neutral architecture like RISC-V.

American ownership of Arm means that future technology upgrades will not be available to Chinese companies on the US Entity List which will further damage Huawei’s handset business.

The deal does not include Arm’s two IoT businesses which will remain with Softbank.