Nvidia in talks to be an anchor investor in Arm IPO

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According to multiple sources familiar with the matter, Arm, the chip designer, is engaging in discussions to secure Nvidia as a major investor, as it continues to pursue its intentions of listing in New York as early as September. This move comes as Arm, currently owned by SoftBank, aims to solidify its position in the market.

Nvidia, the semiconductor firm with the highest value globally, had to cancel its intended purchase of Arm worth $66 billion in the previous year due to regulatory opposition.

The chip manufacturer, located in Silicon Valley, is among many current partners of Arm, alongside Intel. The company, based in the UK, is anticipating that these partners, including the aforementioned chipmaker, will invest in the initial public offering for the long run, as reported by insiders.

The potential investors and Arm are currently in talks about determining its worth. According to an individual familiar with the conversations, Nvidia is aiming for a stock price that would value Arm between $35 billion to $40 billion, whereas Arm is looking for a valuation closer to $80 billion.

The objective of involving significant anchor investors during Arm's IPO commencement in New York is to provide additional support to the company's shares. This move comes as SoftBank, who acquired Arm for a staggering £24 billion in 2016, intends to decrease its ownership in the company.

Numerous independent technology firms and their advisors are keenly observing the progress of Arm as it endeavors to initiate its initial public offering (IPO) in 2023 amid a prolonged decline in new company listings.

Gaining the initial backing of some key investors is a widely used strategy in challenging IPO markets. This approach aims to guarantee interest and provide confidence to other prospective investors.

Arm and Nvidia chose not to provide any comments. According to a source familiar with the matter, the discussions have not been finalized and there is a possibility that they may not result in an investment.

Arm is predicted to be the most financially lucrative company to debut on the US stock market since Rivian, a car manufacturer, went public in late 2021 with an initial market value of $70 billion.

Many people think that it is not as risky as other companies going public, based on its past performance as a publicly traded corporation.

According to individuals familiar with the matter, SoftBank's CEO, Masayoshi Son, has been actively engaged in finding key investors for Arm. Son has been primarily dedicated to amplifying the chip designer's earnings in anticipation of its initial public offering. SoftBank chose not to provide any comments.

Arm and Nvidia have reached out to US regulators to address any possible concerns about a probable minority investment that is estimated to be worth a few hundred million dollars, as per insiders familiar with the matter.

When Nvidia initially declared its intentions to acquire Arm in September 2020, regulatory bodies in the United States and Europe raised objections. They expressed concerns that the agreement could limit competitors' ability to utilize Arm's intellectual property, which is widely present in smartphones and an expanding share of the automotive industry. Additionally, they highlighted the potential for Nvidia to gain access to sensitive information that could impact competition.

Nvidia is already using Arm's technology, but its discussions to financially support the company indicate its desire to broaden its horizons beyond its main area of expertise in graphical processing units (GPUs). GPUs are specialized chips used for speeding up tasks like 3D rendering and training AI. Nvidia aims to venture into central processing units (CPUs) that manage a majority of other computing functions.

According to a knowledgeable insider, Arm is eager to involve Nvidia in its bid in order to highlight the significance of AI in the growth strategy of the UK company. This individual remarked, "AI will be mentioned extensively in the offering document," emphasizing the essentiality of Nvidia's role in implying AI's importance.

This decision would place Nvidia in a more direct rivalry with Intel, as their CPUs have been the major players in the PC and data center industries for a significant period.

Nvidia, having achieved a market value of $1 trillion in May, has just unveiled its initial central processing unit (CPU) utilizing Arm's blueprints. This groundbreaking superchip, named Grace Hopper, aims to cater to the demands of artificial intelligence and high-performance computing.

The number of listings worldwide experienced a sharp decline last year due to investors being discouraged by the drop in stock prices, the increased instability of the market, and the uncertain economic situation. Nevertheless, there has been a recent revival in activity, partially driven by a general improvement in stock prices headed by Nvidia.

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