Nvidia announces its intention to buy chip design giant ARM from Softbank for $40 billion, and employees will get $1.5 billion in equity

• Nvidia said Sunday it has agreed to buy chip designer Arm from Softbank, in a major deal that's expected to have a sizable impact on the semicondutor industry.
• Nvidia CEO Jensen Huang told employees in an email that the $40 billion deal would tranform the chip giant in to a dominant player in "the age of AI."
• Masayoshi Son, chairman and CEO of Softbank, called Nvidia "the perfect partner for Arm."
• Arm will maintain its business of licensing its chip designs to outside firms. Arm-based processors are popular in smartphones and the data center market alike.

Nvidia said Sunday it is buying UK-based Arm from Softbank for $40 billion in a stunning deal that would transform the graphics chip giant into a major AI powerhouse.

The news ended weeks of speculation about Nvidia's reported interest in the chip design company that became a major player in the semiconductor market, posing a serious challenge to giants like Intel.

Nvidia said that it plans to issue $1.5 billion in equity to Arm employees as part of the deal. In a press release, Nvidia says that it expects the deal to close within 18 months, and leave Softbank with a stake in Arm of about 10%.

"We are joining arms with Arm to create the leading computing company for the age of AI," Nvidia Jensen Huang said in a letter to employees on Sunday, in a memo reviewed by Business Insider. "AI is the most powerful technology force of our time. Learning from data, AI supercomputers can write software no human can."

Some analysts have said Nvidia faces major regulatory hurdles in any bid to acquire Arm, which licenses its technology to other major chip companies that compete with Nvidia. In an interview with Business Insider in July, Bernstein analyst Stacy Rasgon said: "The regulatory and the customer backlash I think will be significant."

Nvidia has been a dominant vendor in the graphics chip market. In recent years, it has emerged as a major player in AI technologies which have required semiconductors with more computing power to process huge amounts of data.

Nvidia's graphics processors used for gaming and high-end graphics for blockbuster movies proved to work much better for these data-intensive systems than those offered by rivals led by Intel.

By buying Arm, which Softbank and its Vision Fund subsidiary acquired for $32 billion in 2016, Nvidia will be able to gain access to another critical chip technology in the tech industry. Nvidia will now have access to the technology of a company that created power-efficient chip designs now widely-used in the mobile market. Arm's chip designs are also now being used to run data centers, a fast-growing and lucrative market for chip makers.

"Amazingly, AI software can perceive its environment, infer the best plan, and act intelligently. This new form of software will expand computing to every corner of the globe," Huang said in his letter. "Someday, trillions of computers running AI will create a new internet — the internet-of-things — thousands of times bigger than today's internet-of-people."

Masayoshi Son, chairman and CEO of Softbank, called Nvidia "the perfect partner for Arm."

"Since acquiring Arm, we have honored our commitments and invested heavily in people, technology and R&D, thereby expanding the business into new areas with high growth potential," he said in a statement. "Joining forces with a world leader in technology innovation creates new and exciting opportunities for Arm."

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