NVIDIA To Buy ARM For $40 Billion; The Next Step In Their Love Affair With Cambridge

The 18 Month Courtship Begins

ARM has been very popular with venture capitalists recently, barely four years ago SoftBank purchased it for $32 billion, before splitting off a quarter of it to a different investment group; you can read more about those deals here.   Today we have official confirmation of the previous rumours about NVIDIA taking over ARM, as they begin a process which will involve the approval of the governments of U.K., China, the European Union and the United States.

The offer is a little more complicated than your average housing purchase and includes $21.5 billion in NVIDIA common stock, and $12 billion in cash, of which a ‘mere’ $2 billion has to be paid at signing.  In addition it is possible SoftBank will receive an additional $5 billion in cash or stocks depending on certain financial targets and an additional $1.5 billion in equity will be paid to ARM employees.

ARM will remain in Cambridge but NVIDIA plans to greatly expand their facilities to become a huge AI research centre to further expand NVIDIA’s existing facilities.  Part of the expansion will be a new supercomputer build on ARM processors and NVIDIA GPUs, which will be interesting to watch being developed.  The expansion will also see NVIDIA’s Deep Learning focus expand from it’s current self-driving car and visual recognition systems to medical and health services, which NVIDIA has dabbled in but not to the extent it plans to.

In the verbiage of the deal is a bit of reassurance for those worried this means the end of ARM’s previous take on licensing, the official statement specifically includes a comment on it.  “NVIDIA will continue Arm’s open-licensing model and customer neutrality and expand Arm’s IP licensing portfolio with NVIDIA technology.”  It is not exactly clear how legally binding that statement might be, nor who would be able to apply penalties if NVIDIA changed their plans down the road but at least it leaves a hint of hope for many.

In a blog post Jensen repeated those words, and it does make financial sense in a way as the more licenses they grant the more royalties they will make.  On the other hand there is no real competition in this market and for the short term they could certainly damage some of their competition by refusing to renew licensing. In the long term, you can be guaranteed something would replace those chips, which would mean ARM ceases to be the largest silicon slinger on the planet.  After all their are roughly 180 billion devices currently running on ARM, with 22 billion of those appearing last year.

Those numbers do offer a compelling financial reason to continue letting anyone get an ARM license, but we shall see how this develops over the coming year.