Chip Designer Arm in Talks With Nvidia to Anchor IPO, FT Says

Katie Roof and Ian King, Bloomberg News

Signage at the Nvidia Corp. offices in Taipei, Taiwan, on Friday, June 2, 2023. Nvidia Chief Executive Officer Jensen Huang is heading to China to meet with tech executives in the world's biggest chip market, despite rising tensions between Washington and Beijing, according to people familiar with the matter. Photographer: I-Hwa Cheng/Bloomberg , Bloomberg

(Bloomberg) -- Nvidia Corp. is in talks to join a list of investors in anchoring an initial public offering of Arm Ltd., the chip designer backed by SoftBank Group Corp., according to people familiar with the discussions.

The group of IPO backers won’t be finalized until the offering gets underway in the fall, and the parties aren’t currently close to a formal agreement, said the people, who asked not be identified because the deliberations are private. The final list of anchor companies is likely to number five or six, one of the people said.

The Financial Times previously reported that Nvidia was seeking to invest at a valuation of $35 billion to $40 billion, lower than the $80 billion that SoftBank wants.

Representative for Nvidia and Arm declined to comment.

Nvidia, the world’s most valuable chipmaker, is a longtime partner and client of Arm — and tried to acquire it in a deal that unraveled last year. SoftBank embarked on plans for an Arm IPO in the wake of that failed transaction. Bloomberg reported earlier that Arm was in talks with possible strategic investors — including Nvidia competitor Intel Corp. — to participate in what would be the year’s biggest initial stock sale.

Bringing in anchor investors can help drum up interest and momentum for an IPO, especially given the elevated valuation that SoftBank is seeking. Arm’s success is critical for the Tokyo-based investment firm — which bought Arm for $32 billion in 2016 — to regain its footing after losing billions of dollars on startup investments.

Read More: Arm Chief Pitches Chip Designer as AI Play in Buildup to IPO

Nvidia, whose chips are vital to powering artificial intelligence, walked away from its proposed $40 billion deal to acquire Arm after hitting opposition from regulators and customers. The plan, which was proposed in 2020, collapsed after a lawsuit by the US Federal Trade Commission.

SoftBank founder Masayoshi Son has said he hopes the Arm IPO can be the largest ever by a chip company. Arm’s valuation still hasn’t been set, and the company could be valued anywhere from $30 billion to $70 billion, Bloomberg News previously reported.

Shares of SoftBank erased earlier losses on Wednesday, rising more than 2% in Tokyo.

Arm is looking to raise as much as $10 billion in a New York listing later this year, after rejecting appeals from UK prime ministers to return to London, where it once traded.

The firm’s tech is found in most of the world’s smartphones and is pervasive across the electronics industry. SoftBank executives have been pitching lofty valuations on the chip designer by presenting it as an artificial intelligence investment because its technology supports AI infrastructure.

Anchor investors buying $100 million to $200 million worth of shares are increasingly popular for semiconductor-related IPOs. Growth equity firm General Atlantic invested about $100 million in Intel-backed Mobileye Global Inc.’s IPO last year, while Qualcomm Inc. backed GlobalFoundries Inc.’s listing in 2021.

--With assistance from Jake Rudnitsky and Min Jeong Lee.