Nvidia’s deal with Arm leads to a trillion-dollar market value

The acquisition of Nvidia’s $ 40 billion arm holdings will be the largest deal ever in Semiconductors.

The announcement, made on Sunday, was met with Nvidia’s NVDA driving investor enthusiasm,
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The share price rises to 8% and holds more than $ 25 billion in market value – about two-thirds of the equity needed to make the acquisition.

But why is it such a big purchase and what does it mean for Nvidia? This is the question investors should ask.

Acquisitions of this size will have obstacles but, make no mistake, Nvidia with the arm is a powerful combination that promises to take Nvidia to new heights, assuming that it can get past regulators and the current arm. May keep licensees on board.

Let’s look at the pros and cons.

Read:Nvidia and SoftBank are each winners in a $ 40 billion deal for Arm Holdings

The deal’s positivity outpaced the negative gap, particularly for the two companies involved. SoftBank, in view of recent challenges, is trying to unload the arm, and the company does not have a lot of natural landing locations, particularly landing locations that are as natural of a fit as Nvidia.

Chip design

For those less familiar with ARM, the acquisition takes Nvidia from a top-tier position as a GPU manufacturer for data centers, automotive, and gaming, and immediately catapults the company as a top-tier chip designer with that scale Cement does, if any other company, can match. While companies like Intel INTC
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Qualcomm QCOM,
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All do something that would be unique to the Nvidia Plus arm combination, these companies represent the scale level we are talking about.

Arm and its intellectual property (IP) are already included in the billions of chips sold each year. This includes a significant amount of smartphone devices that use arm-based microcontrollers, but a large part of the overall revolution of smartphone devices that leverage arm architecture.

Today, Nvidia has effectively established a zero smartphone business, and with this acquisition Nvidia has instantly become one of the biggest players, arguably society’s most valuable technology. Nvidia smartphones with RV will benefit greatly from the continued growth, which is all but certain in the next decade.

artificial intelligence

Another large-scale opportunity for Nvidia is going to use Arm’s licensing model to massively introduce its artificial intelligence (AI) technology. In CEO Jensen Huang’s comment to analysts soon after the announcement, he went on to mention the substantial business opportunity around AI and giving Nvidia’s Ampere architecture an edge, using the Internet of Things (IoT), console, smartphone, and automotive. Was very forward in using.

The challenges here are the highest with the approval of regulators and the trust of Arm’s existing customer base. With little overlap in current offerings, I don’t see how the regulators become overly problematic. However, these things are never a slam sting. Remember that Nvidia was able to navigate and overcome these challenges with its recent acquisition. I imagine that China would be the biggest prospect, given Britain’s planned concessions to maintain Arm’s corporate headquarters in Cambridge, England.

Arm neutrality

Licensees will certainly see conflict with this acquisition. So far, Arm has become a hub for licensing chipmakers and leveraging their way to new, innovative products that power billions of devices, most notably smartphones. Having an arm run with a high degree of autonomy may smooth out some of the edges, but larger licensors including Samsung, Huawei and Qualcomm will have questions about Arm’s neutrality after completing this acquisition by Nvidia.

Finally, I think Nvidia will do what it will to protect its $ 40 billion investment in Arm in terms of both customers and regulators. I believe the deal will be in the 18-month time frame provided.

The acquisition of Arm by Nvidia is not only the biggest deal among semiconductors, but a springboard to take Nvidia’s market value to the north of half a trillion dollars, with a continuous runway for growth. With Nvidia’s already strong momentum, coupled with a large set of tools in the form of architecture and licensing to expand its footprint, the deal is significant as a sign of early market reaction.

Can Tridian be in Nvidia’s sites? Ambitious, perhaps, but certainly not out of the question for Nvidia with Arm in tow.

Daniel Newman is a principal analyst at Futuram Research, which provides research, analysis, advice and / or consulting to Qualcomm, Nvidia, Intel, Samsung, ARM and dozens of companies in the tech and digital industries. Neither he nor his firm has held any equity position in any of the companies cited. Follow her on twitter @danielnewmanUV.