Nvidia’s proposed purchase of Arm from SoftBank for $40 billion provoked a diverse set of reactions on Monday.
Some say the deal will create a computing company with the broadest reach of all time, including with chips used inside data centers, mobile devices and smartphones. Others say Nvidia is likely to face monopoly lawsuits by competitors such as Intel, Apple and Qualcomm who also use Arm design licenses and will feel the deal gives Nvidia an unfair market advantage. (Apple and Intel did not respond when asked to comment on Monday.)
First, the pro side:
“The Nvidia-Arm deal is not only the largest semiconductor deal by dollar volume at $40 billion, but I believe the one with the most significant impact,” said Patrick Moorhead, an analyst at Moor Insights & Strategy. “The deal fits like a glove.”
Arm will be able to use Nvidia GPUs and other technology for AI work and acceleration in data centers and supercomputers, while Nvidia can gain access to smartphones and trillions of coming edge devices where Arm and its CPUs have a massive lead, analysts who support the deal said. Arm designs are used in an overwhelming majority of smartphones.
Nvidia CEO Jensen Huang committed on Sunday to keeping Arm open licensing deals in place once the deal closes as expected in 18 months. The deal “can only make Nvidia stronger as long as it sticks with its commitment to let Arm do what they do best, which is creating and licensing IP in a globally-neutral way,” Moorhead said.
“Nvidia’s IP can now participate in the smartphone and tablet market,” Moorhead added. “I could imagine a super gaming smartphone and tablet with an oversized Nvidia GPU. Nvidia already participates on the edge with robotics and edge servers, but with Arm’s IP, I could imagine further penetration.”
Existing Arm licensees will likelly be concerned that Nvidia will get early access to new tech advances from the Arm team. However, "Nvidia plans to mitigate that concern by also offering to license the Nvidia GPU IP to those same companies," said Kevin Anderson, an analyst at Omdia. While those licensees could use open source RISC-V as an alternative, but that move would be expensive in terms of tools and other ecosystem changes, he added.
Roger Entner, an analyst at Recon Analytics, called the planned purchase “a very logical next step for Nvidia, making it ever-more important in the processor world. Arm is the indispensable mobile processor IP company and it will only become more important and valuable over time.”
SoftIron, a company that makes data center appliances using Arm technology quickly issued a statement in support of the deal. “Nvidia’s aspirations to bolster their GPU-centric offering with Arm will provide to be a real force for innovation in the X86 cones dominated data center landscape,” said CEO Phil Straw. “Nvidia’s acquisition puts a spotlight on Arm technology and its potential to change data center architecture that we think is worthy of attention…We’re excited to see the innovation that Nvidia has in store.”
Now, to the con side:
“This deal will give many of Arm’s licensees pause, especially Qualcomm, Broadcom and other chip providers and perhaps even Apple,” said Jack Gold, an analyst at J. Gold Associates. “Suddenly, an open licensing model is now owned by a chip-producing competitor. Nvidia claims it will keep the open model in place and keep Arm separate, but that’s unlikely. Arm will be owned by a company that sells chips, so that’s a totally different animal.”
Nvidia competitors will worry in the long term that Nvidia receives an unfair competitive advantage in the market, since Nvidia won’t be licensing and paying a royalty for Arm intellectual property, Gold added. “And will other companies be willing to subsidize Nvidia by paying a royalty to Arm, which then goes to Nvidia. Will licensees worry their proprietary use of Arm IP might somehow be compromised? I think this will be an issue longer term, especially for the biggest players who have the wherewithal to go it along and ultimately design out the Arm IP if they perceive it as a risk.”
Phil Amsrud, an analyst at IHS Markit added, “I suspect Arm’s existing users will not be thrilled,” he said on Monday.
In July, when the Nvidia purchase of Arm was widely expected, other analysts at Omdia predicted lawsuits based on conflicts of interest by competitors. “If Nvidia buys Arm, there is little to no competition for embedded graphics,” said Omdia analyst Tom Hackenberg at the time. Omdia analyst Kevin Anderson added at the time that there would be “serious opposition” to the deal. Semiconductor companies that rely on equal access to Arm IP through their licensing models “will be concerned that Nvidia will enjoy an earlier access and that the core roadmap will be tailored towards Nvidia’s needs more than the general market’s.”
Gold said that Nvidia tried to use Arm-based chips in the past and failed. “This deal is far from a slam dunk for Nvidia,” he said. Nvidia intends to focus on using Arm technology for data center applications, and could push to impact the smartphone market, but would face a tough competitor in Qualcomm, Gold added.
On another front, Gold said if Nvidia ultimately buys Arm and Arm is then considered a U.S. company, wouldn’t its licenses fall under the terms of the Trump Administration’s boycotts on selling to companies in China such as Huawei? “That would be a huge disruption [that] could be a big concern and might give China pause to allow the acquisition to go through,” Gold said.
Omdia's Anderson also said Chinese regulators will be concerned that Nvidia wants to use the Arm purchase as a way to move AI from the cloud to the edge. The Chinese government is making huge investments in AI and may require access guarantees in exchange for regulatory approval, he said. Other regulatory bodies may try the same approach.
Arm co-founder Hermann Hauser told BBC Radio that the deal is “an absolute disaster for Cambridge, the U.K. and Europe.” However, Huang said Nvidia will open an AI research lab in Cambridge and keep the Arm headquarters there.
Another strong condemnation came from Geoff Blaber, vice president of research for the Americas at CCS Insights. He told Seeking Alpha, “An acquisition by Nvidia would be detrimental to Arm and its ecosystem. Independence is critical to the ongoing success of Arm and once that is compromised, its value will start to erode.” He thinks the deal will push chip companies to use open source RISC-V designs.
He added in an email to Fierce Electronics: ”Nvidia is pledging that it can maintain neutrality. This is easy to pledge but will be hard to deliver in practice given that it will be competing against several Arm licensees. Perception is also reality. If licensees view Nvidia as a competitor and question Arm’s long-term independence, it will accelerate moves to alternative architectures such as RISC-V.”
Nvidia stock rose more than 6% mid-day on Monday. SoftBank rose by 8% mid-day Monday.