NVIDIA confirms acquisition of Arm, welcoming the era of computing for everything

By Forbes Patrick Moorhead

Today, I spoke with Nvidia CEO Jensen Huang and Arm CEO Simon Segars about the largest and, in my opinion, most important semiconductor acquisition of all time. While Huang and Segars have very different personalities, their views on the deal during the video call were consistent, well thought out, and well communicated. I am impressed with what these two companies can create over the next decade, and I have been thinking so since the rumors began to circulate in July.

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Here are the transaction highlights from the press release:

Price: $40 billion in NVIDIA stock and cash

Accretive: Immediately accretive to NVIDIA's non-GAAP gross margin and EPS

Cambridge will continue to invest: creating a "world-class" AI research and education center for healthcare, life sciences, robotics and self-driving cars. In addition, building an Arm/NVIDIA-based AI supercomputer research center

SoftBank ownership: Will hold 10% stake in new entity

The following are operational highlights:

Arm operating structure: Arm will operate as a NVIDIA division

Arm location: Arm will continue to be headquartered in Cambridge

Intellectual Property: Will remain registered in the UK

Licensing model: Continue to operate its open licensing model while maintaining its global customer neutrality

Analyst Opinion

NVIDIA's deal with Arm is not only the largest semiconductor deal in dollar terms at $40 billion, but I believe it is also the most impactful. I view this deal as "just right" because Arm plays in areas where NVIDIA is not successful or less successful, and NVIDIA plays in many areas where Arm is not successful or less successful. NVIDIA brings incredible capital to Arm, and as we have seen since the SoftBank acquisition, Arm has increased its market share and competitiveness. SoftBank's investment has driven Arm's expansion in the data center, automotive, IoT, and AI markets. I believe NVIDIA can only make it stronger if it sticks to its commitment to let Arm do what they do best, which is to create and license intellectual property in a globally neutral manner.

Nvidia CEO Jensen Huang is excited about the future prospects of the combined company. He told me, "We are about to enter a whole new phase where we will create an Internet of Things that is thousands of times larger than the Internet we enjoy today. A lot of people don't realize this. So we want to create a computing company for this era of artificial intelligence."

Software is a key part of the combined company’s vision. “We’re moving into a world where software doesn’t just run in one place,” Arm CEO Simon Segars told me. “Your application today might run in the cloud, it might run on your phone, there might be some embedded applications running on the device, but I think with the rollout of 5G and some of the technologies that Huang just talked about, this will become increasingly widespread across all of these places. Delivering and managing that is a huge undertaking. And it all requires a compute architecture that scales from the smallest subset all the way up to the largest supercomputer, and Arm can solve that.”

New Opportunities

The new NVIDIA Arm portfolio now plays a role in nearly every market segment in the data center, data center edge, PC, smartphone, and IoT. My imagination is full of possibilities:

More "big core" Arm data center general-purpose processors

Larger CPU, GPU, NPU and network data center portfolio

Combination of CPU-GPU-NPU and shared memory system for the HPC market

Smartphone and tablet GPU/NPU IP based on NVIDIA

Arm-based SoCs for Windows laptops

Arm-based big-core CPU for the highest-performance Windows desktop

Huang told me that the first thing the combined company will do is “promote NVIDIA technology through Arm’s vast network,” so I expect NVIDIA GPU and NPU IP to be available to smartphone, tablet, TV, and automotive SoC providers as soon as possible. 

When asked what will change, I like Huang’s response, saying, “What will change is the speed of our roadmap. We are convinced that the data center and the cloud are cheering for Arm processors, Arm CPUs. Energy efficiency directly translates into computing power, computing throughput, and the cost of providing services. Arm has achieved outstanding results by increasing its investment in the data center, and I think AWS’s Gravion2 is the bright spot in general computing right now. While Huang made it clear that its GPUs will continue to support x86 and POWER platforms, I can imagine that there will be more NVIDIA data center GPUs connected to Arm-based CPUs in the future. This is a huge opportunity.

Are Arm IP customers affected?

As for whether Arm-IP customers will choose other suppliers? I believe that Huang Renxun is a pragmatic person. After all, this is a huge investment of 40 billion US dollars, and he is not interested in disrupting Arm.

I think many people will misjudge how Huang will run Arm, and I believe he respects Arm's business model and doesn't want to mess it up.

Passing regulatory review

As for the claim that this deal didn't pass regulatory review? First, the combination of two very different business models, Arm licensing IP and NVIDIA making chips, doesn't seem like it would create a monopoly. NVIDIA GPUs have 0% smartphones, 0% TV share, and a very small GPU IoT share. Arm has 0% datacenter GPUs, 0% PC GPU market share, and small Chromebook GPU market share. Seeing Huang get approval for Mellanox so quickly, even in China, gives me confidence that the company can get this thing done.

I fully expect there will be strong pushback from NVIDIA's competitors to regional regulators, which could result in some agreements and special requests, but I think this deal will go ahead.

Finish

I believe the Nvidia Arm deal is an incredibly exciting one, with the combined company being able to operate in every market and unit of computing. If you believe there will be trillions of IoT endpoints and AI is important for controlling energy on devices, at the edge or in the data center, then this deal should excite you.