NVIDIA buys Arm Holdings from SoftBank for $ 40 billion
NVIDIA (NASDAQ: NVDA) yesterday announced an agreement to buy mobile chip designer Arm Holdings from SoftBank (OTC: SFTB.Y) in a $ 40 billion cash and stock transaction. Rumors have circulated in recent weeks that a deal is imminent. NVIDIA said the acquisition will immediately increase the company’s adjusted gross margin and earnings per share.
It is the largest acquisition ever made by NVIDIA, long before its $ 6.9 billion purchase from high-performance computing specialist Mellanox early last year.
Image source: NVIDIA.
SoftBank to be paid with 44.3 million NVIDIA shares, with a total value of $ 21.5 billion, giving SoftBank less than 10% stake in NVIDIA, as well as $ 12 billion in cash from its balance sheet . There is also a $ 5 billion earn-out provision subject to Arm meeting certain financial performance targets.
Arm Holdings has made a name for itself designing the mobile chips that power smartphones and tablets and licensing those designs to all comers. But it has extended its reach to data centers and artificial intelligence (AI) applications, an area NVIDIA has dominated in recent years.
“AI is the most powerful Technology force of our time and launched a new wave of computing, ”said Jensen Huang, CEO of NVIDIA. “In the years to come, billions of AI-powered computers will create a new Internet of Things which is thousands of times the Internet of People. Our combination will create a fabulously positioned company for the age of AI. “
NVIDIA is the undisputed leader in graphics processing units (GPUs) that deliver realistic images in video games. And in recent years, the company has grown into a powerhouse in high-performance computing used in data centers, AI applications, and cloud computing, providing GPUs to each of the major cloud providers.
This article represents the opinion of the author, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are heterogeneous! Questioning an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.