Nvidia $NVDA-0.4%, the largest semiconductor company, is seeking to be a key investor in the IPO of a UK chip design company.
SoftBank, Arm's current owner, is going ahead with its plan to float Arm on the stock market through an initial public offering. Nvidia was forced to halt its planned $66 billion acquisition of Arm as it was stopped by antitrust authorities.
Nvidia is now looking to be a key investor in Arm's launch, which could come as early as September. Nvidia is one of several partners the company hopes will buy a significant long-term stake in its IPO. Another such company is Intel, among others. This should help stabilize the market price while SoftBank will be reducing its stake.
According to a source familiar with the matter, the valuation of the company remains under discussion. While Nvidia values the company between USD 35 and 40 billion, Arm reportedly sees itself closer to USD 80 billion.
Many tech companies and experts are watching this IPO closely, as it comes after a year-long lull in IPO activity. Launch volumes plummeted last year in response to weakening stocks, increased volatility and an uncertain economic outlook.
Securing key investors ahead of the IPO itself is a common tactic in more difficult market conditions. It serves to ensure demand and reassure potential investors. Further reassuring investors is that Arm has traded on the stock market in the past and is thus perceived as safer than companies entering the stock market for the first time.
Arm is expected to be the largest IPO since Rivian went public in 2021. Rivian's initial market capitalization was $70 billion.
According to sources close to the negotiations, the companies have already reached out to regulators to calm fears of cartel behavior. This is because it is supposed to be a small stake in the low hundreds of millions of dollars.
Fair competition authorities have halted Nvidia's efforts to buy Arm in 2020. According to regulators, it could mean limiting competitors' access to Arm's intellectual property. This is used by, for example, most mobile phones, chips for the automotive industry and also by Nvidia itself.
According to experts, the move indicates a greater effort by Nvidia to break into the central processing unit (CPU) development industry. Nvidia also recently developed its first CPU using just Arm technology. Nvidia's main segment is the development of graphics processing units (GPUs), which are used for graphics and have also found applications in artificial intelligence and scientific computing.
Arm, on the other hand, is trying to break into the development of chips usable for artificial intelligence, where Nvidia has very limited competition. "In the IPO document, 'AI' will be every third word," commented a person familiar with the company's plans. "Nvidia is important because its involvement implies AI," the same person added.
The move would put Nvidia in closer competition with Intel, which has long dominated the PC CPU market.
SoftBank shares on the Frankfurt stock exchange tacked on 2.63% to €44.505 a share.
Honestly, when that chart shot up like that a few weeks ago, I was expecting more of a punch & dump... but now I'm starting to feel like this stock will just hold that price.
Similarly with $AVGO+1.2% and $VMW-5.0%, here they finally got away with it today with the EU by simply making sure that they don't disadvantage the competition and somehow commit to the future.