After a slew of rumors and leaks, NVIDIA has finally made it official. Team Green will acquire British chip designer, Arm for a massive $40 billion in what is going to be one of the largest deals in the history of the semiconductor industry. Don’t expect any NVIDIA Data Center products with an Arm CPU anytime soon though, as this is just the beginning. The company will have to clear multiple regulatory hurdles in the UK, US, China, and other countries.
NVIDIA will pay the former Arm owner, SoftBank approximately $40 billion, with $12 billion in cash and the remaining $21.5 billion in stocks. The remaining $6.5 billion will come from a $1.5 billion in equity that NVIDIA will be paying to Arm employees along with a $5 billion “earn-out” if the chip designer meets a set of financial targets.
NVIDIA’s massive market cap of $330 billion is what really made this acquisition possible. That in turn has been the result of its thriving PC gaming and Data Center businesses, with the former being especially important. As AI-accelerated workloads become more and more relevant, NVIDIA’s leadership in this segment has allowed it to increase its Data Center revenue to a massive 1.75 billion in Q2 2020, higher than its Gaming segment for the first time in history.
As for where Arm will fit into NVIDIA’s grass-green picture, the most likely slot is the Data Center market where Arm-based CPUs will complement the existing Tesla GPU accelerators, reducing its dependence on rivals, Intel and AMD for a third-party CPU solution.
The other avenue from this deal is the expansion of Arm’s IP licensing eco-system. NVIDIA is looking to include its own proprietary architectures such as GPUs, accelerators, and network processors in Arm’s portfolio. The most obvious result of this addition will be the likely replacement of Arm’s Mali GPUs by GeForce-based designs in the smartphone market.
Of course, for all this to happen, NVIDIA will have to do a lot of explaining, to Arm’s clients as well as regulatory agencies across the globe. All in all, this deal should take at least a year to resolve, if everything goes as smoothly as the stakeholders hope.