The deal pays SoftBank $21.5 billion in Nvidia stock and $12 billion cash, including a $2 billion payment at signing. SoftBank could earn an additional $5 billion in cash should Arm meet specific financial targets.
Shares of both Nvidia and SoftBank rallied sharply on news of the deal.
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“In the years ahead, trillions of computers running AI will create a new internet-of-things that is thousands of times larger than today’s internet-of-people,” Nvidia CEO Jensen Huang said in a statement. “Our combination will create a company fabulously positioned for the age of AI.”
Arm, which is best known for selling processor designs, gives Nvidia the ability to compete with the likes of Intel Corp. and Advanced Micro Devices in the highly competitive data center chip market.
Nvidia’s chips are used to make video games more realistic, and to support self-driving cars and other artificial intelligence.
Joining the two companies will “advance computing from the cloud, smartphones, PCs, self-driving cars and robotics, to edge IoT, and expand AI computing to every corner of the globe,” Huang said.
SoftBank acquired Arm in 2016 for $31.4 billion, which at the time was the largest semiconductor deal.
SoftBank will receive a less than 10% stake following the completion of the deal. Arm employees will receive $1.5 billion in equity.
Nvidia plans to retain the Arm name and expand its presence in Cambridge, England, establishing a new artificial intelligence research facility.
Nvidia shares were up 107% this year through Friday, outperforming the S&P 500’s 7.94% gain.