Nvidia to buy Arm Holdings from SoftBank for $40 billion

Key Points

• SoftBank will sell Arm to Nvidia in a $40 billion deal, the companies announced Sunday night
• Arm designs the architecture for mobile chips used in almost every mobile device in the world, from the iPhone to just practically every Android device.
• SoftBank bought Arm for $31.4 billion in 2016, and the sale is seen as a move to raise much-needed cash as it has recently lost a significant amount of money in its high-profile investments in companies like WeWork and Uber.

Chipmaker Nvidia has agreed to buy Arm Holdings, a designer of chips for mobile phones, from SoftBank in a deal worth $40 billion, the companies announced Sunday. The deal will include $21.5 billion in Nvidia stock and $12 billion in cash, including $2 billion payable at signing.

SoftBank acquired Arm in 2016 for $31.4 billion in 2016 in one of its largest acquisitions ever. Arm is best known as the designer of an architecture used in chips in most mobile phones, including the Qualcomm chips used in most Android phones, as well as Apple's iPhone. Apple is also planning to shift its Mac computers from Intel chips to an Arm-based design.

Nvidia said it expects the deal to take about a year to close.

Nvidia, whose chips are widely used to support graphics and artificial intelligence applications, including for self-driving vehicles, pledged that it would "continue Arm's open-licensing model and customer neutrality." Arm's operations will remain in the United Kingdom.

"This combination makes financial sense, and it's a great deal for SoftBank and us," Nvidia CEO Jensen Huang said in a press call Monday.

SoftBank bought Arm as an investment in the so-called Internet of Things -- the idea that wireless connectivity among everyday items such as refrigerators, cars and other devices would lead to useful new scenarios. 

At the time, SoftBank Chairman Masayoshi Son told reporters, "This is a company I always admired for the last 10 years...This is the company I wanted to make part of SoftBank. I am so happy."

However, SoftBank's finances have deteriorated this year as the company has lost money on investments in companies like WeWork and Uber. More recently, the company's shares lost value as it was reported that it had taken some large stakes in tech giants, which have suffered a loss in stock market value in early September. It's unclear how much money SoftBank will actually make on the sale, since it has likely invested a lot in Arm since the acquisition.

The company is also looking for cash to help start-ups it invested in through its Vision Fund, many of which have struggled during the coronavirus pandemic and subsequent lockdowns. Earlier this summer it announced it would sell up to $21 billion of its stake in T-Mobile. 

Meanwhile, Nvidia is on an absolute tear, thanks in part to a boom in video games due to the pandemic. This week, it will launch a new graphics card for PCs that shows promising performance for PC gamers. The company projected about 46% growth in revenue for the third quarter in its last earnings report.