UK-based chip designer Arm was valued at $54.5bn after its initial public offering (IPO) in New York on Wednesday. This set the per-share value at $51 with cornerstone investors coming from some of its biggest customers including Apple, Nvidia and Samsung.
Japanese investment company SoftBank took full control of the company last month after acquiring the 25% stake it didn’t already own. It purchased the stake from its own $100bn Vision Fund earlier this year for $16bn, valuing the company at $64bn.
The IPO will raise $4.87bn for SoftBank and, while the $54.5bn valuation is less than when it purchased the stake from Vision Fund, it is still higher than the $40bn SoftBank would have raised in its failed deal to sell the chip designer to Nvidia last year.
Move towards AI and cloud
Arm chips are ubiquitous throughout the technology sectors, used in everything from smartphones to supercomputers. Roughly 23 billion Arm-based chips, made by companies ranging from Apple to Qualcomm, were shipped in the first three quarters of last year alone.
The company was listed on the London Stock Exchange and Nasdaq from 1998 until 2016, when the business was acquired by SoftBank in 2016. The Japanese company’s decision to list Arm on the New York-based Nasdaq instead of the London Stock Exchange was widely seen as a blow for UK tech when announced in March.
Shares in the company will begin trading today with Apple, Nvidia, Alphabet, AMD, Intel and Samsung as the cornerstone investors. These are the biggest customers for Arm products which feature in 99% of all mobile devices.
There has been a slowdown in the smartphone market but Arm hopes to build its share in the cloud market. It has a 10% share at the moment but hopes to grow at 17% annually through 2025 thanks to growing demand for AI.
Experts have previously warned that the success of Arm’s IPO will fall on how well it can position itself as an AI company. GlobalData analyst Mike Orme told Tech Monitor last month that the British semiconductor manufacturer moving to focus on AI will override the problems of market slowdown in the smartphone sector – where it has minimal room to grow.
“Softbank’s filing for the Arm IPO mentions AI 47 times but fails to make a genuine case that Arm is an AI company in the same league as Nvidia,” said Orme. “However, if CPUs are used more widely than GPUs in end-user devices such as smartphones to run AI models, Arm could score heavily in AI.”
That is already happening, with both Qualcomm and Apple fine-tuning their own Arm-based chips to be able to run frontier AI models such as Meta’s Llama 2. Apple is also running a frontier model on its new iPhone 15 that can be used for transcription and voice cloning.