Nvidia in talks to be anchor investor in Arm IPO

GET FREE IPO UPDATES

we will send you one myFT Daily Digest Latest Email Rounding IPO News every morning.

Chip designer Arm is in talks to bring on Nvidia as an anchor investor, while the SoftBank-owned company continues to push for plans for a New York listing as soon as September, multiple people with knowledge of the talks said.

Nvidia, the world’s most valuable semiconductor company, was forced to abandon plans to acquire Arm for $66 billion last year after regulators challenged the deal.

The Silicon Valley-based chip maker is one of several existing Arm partners, including Intel, with the UK-based company expected to take a long-term stake in the initial public offering phase, according to the people.

Potential investors are still in talks with Arm over its valuation. A person familiar with the discussions said Nvidia is looking to come at a share price that would value Arm in the net range of $35 billion to $40 billion, while Arm wants closer to $80 billion.

Arm’s launch of its IPO in New York will aim to bring in large anchor investors to help support the stock as SoftBank, which bought Arm in 2016 for £24bn ($32bn), is selling its stake.

Many private tech companies and their advisors are watching closely to see whether Arm can be successful in launching its IPO in 2023 after a year of declining new listings.

Securing the upfront backing of a few anchor investors is a popular strategy during tough IPO markets, as a way to ensure demand and reassure other potential investors.

Arm and Nvidia declined to comment. A person familiar with the situation said that the talks are not complete and the investment may not happen.

Arm is expected to be the most valuable company to go public in the US after automaker Rivian, which listed in late 2021 with an initial market capitalization of $70bn.

Given its past record as a public company, it is considered less risky than many IPO candidates.

People close to SoftBank said its founder Masayoshi Sun has been personally involved in seeking anchor investors for the arm. Sun is focusing on boosting the chip designer’s revenue ahead of its IPO. SoftBank declined to comment.

Arm and Nvidia have approached regulators in the US to address any potential concerns about what is likely a small minority investment of at least hundreds of millions of dollars, according to people close to the discussions.

When Nvidia first announced plans to take over Arm in September 2020, competition authorities in the US and Europe objected. They said the deal could restrict rivals’ access to Arm’s intellectual property, which can be found in the vast majority of smartphones and a growing share of the automotive market, as well as give Nvidia access to competitively sensitive information. Is.

Nvidia is already an Arm customer, but its talks of investing in the company point to larger ambitions to expand beyond its core business into “graphics processing units” — chips dedicated to speeding up specialized tasks, including 3 3D rendering and training of artificial intelligence – the “central processing units” that handle most other computing tasks.

A person familiar with the plans said Arm was keen to bring Nvidia into its bid as a way of putting AI at the heart of the UK group’s growth plans. “Every third word in the offer document will be AI,” the person said. “Nvidia is so important because of what its partnership means to AI.”

The move will bring Nvidia into closer competition with Intel, whose CPUs have long dominated the PC and data center markets.

Nvidia, which in May became the first chip maker to reach a $1 trillion valuation, recently produced its first CPU using Arm’s design as part of a so-called superchip called Grace Hopper and artificial intelligence. Designed for intelligence and high-performance computing.

Global listing volumes declined last year as investors were disheartened by falling stock prices, rising market volatility and an uncertain economic outlook. However, activity has begun to pick up in recent weeks, partly thanks to a massive jump in stock prices led by Nvidia.

Additional reporting by Richard Waters