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Nvidia Grabs Arm for AI

September 29, 2020

Author: Linley Gwennap

Nvidia aims to become the world’s leading computing company with its $40 billion acquisition of Arm, but the mismatch between the two businesses will make it a challenge to pull off. Nvidia sells chips, cards, and a few systems; Arm licenses intellectual property (IP). Nvidia generates most of its revenue from PC and data-center customers; Arm gets it mainly from smartphones, consumer electronics, and microcontrollers. To make the deal pay off, Nvidia must find a way to expand Arm’s revenue while competing against some of its largest licensees. To accomplish this feat, Nvidia CEO Jensen Huang, a notoriously hands-on manager, must let Arm operate independently.

In announcing the deal, Jensen outlined three primary reasons for the combination. First, to license Nvidia’s GPU and AI technology through Arm’s channel. Second, to invest in making Arm CPUs a leading competitor in the data center. Third, to increase Nvidia’s position in edge computing; while the company is already strong in the data center, it is seeking opportunities for its AI technology in small service-provider data centers, autonomous vehicles, and factories.

Maintaining Arm’s independence is critical for that business to continue its success. Once the deal closes, Nvidia plans to integrate Arm rather than maintain it as a subsidiary, increasing back-office savings but limiting its independence. Any hint of bias could cause nervous Arm licensees to at least consider alternative IP suppliers. Nvidia has pledged it will continue to offer Arm licenses on neutral terms to any company, although whether that pledge applies to any new technology such as GeForce remains unclear. Regulators may require the company to legally commit to neutral licensing before they approve the acquisition.

Subscribers can view the full article in the Microprocessor Report.

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