The British chip design company Arm is in talks to bring in Nvidia as an anchor investor in its US flotation, according to a report.
Arm, based in Cambridge, is in discussions with the world’s most valuable semiconductor company about taking a stake in the business during the initial public offering (IPO), the Financial Times reported.
Nvidia, which is riding high on demand from artificial intelligence (AI) companies for its products, was forced to pull out of a $66bn (£51bn) deal to buy Arm last year.
Negotiations are continuing over the valuation, with Nvidia seeking a share price that would value Arm at between $35bn and $40bn, according to the FT, while Arm is looking for a valuation closer to $80bn. Nvidia, which had to withdraw from the Arm acquisition due to regulatory concerns, is reportedly aiming to make an investment in the low hundreds of millions of dollars.
Arm licenses its designs to makers of semiconductors – chips described as the “brains” of electronic devices – including Nvidia. Arm is owned by the Japanese investment company Softbank, which bought it for £24bn in 2016.
Anchor investors typically buy shares at an agreed price before an IPO begins, to enhance the stability of an offering and reassure potential investors. The FT reported that the flotation could take place in New York as soon as September.
Ben Barringer, an analyst at the wealth management company Quilter Cheviot, said Arm’s status as a “crucial” player in the technology sector made interest in the IPO from companies such as Nvidia likely.
Referring to speculation that the US chipmaker Intel is also being courted as an anchor investor, Barringer said Apple and Microsoft could yet become involved.
“Having [Arm] controlled by one industry player was never going to work and thus having anchor investors helps to alleviate that problem. It is unlikely one company will be a dominant anchor investor,” he said.
“Following this news, watch the moves from Apple and Microsoft. Apple is Arm’s biggest customer and as such will want influence in order to secure its supply.”
An AI-driven spike in demand for its products has pushed Nvidia, based in California, to a market capitalisation of $1tn.
Generative AI tools such as ChatGPT are built on large language models, which are systems powered by processors – a type of chip – such as those made by Nvidia. According to one analyst estimate, building the ChatGPT chatbot took 10,000 Nvidia chips.
Arm and Nvidia declined to comment.
