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Monday, November 30, 2020

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  • Nvidia Corp to buy UK-based Arm for £31 billion from Japan’s SoftBank.
  • SoftBank executives suggest taking the company private.
  • The Japanese conglomerate will get a 6.7% to 8.1% stake in Nvidia.

Nvidia Corp (NASDAQ: NVDA) said on Monday that it will purchase Arm (Cambridge-based semiconductor and software design company) for £31.10 billion from Japan’s SoftBank. Arm is a prominent supplier of chips to several companies from across the globe, including the U.S. tech giant, Apple Inc.

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Shares of Nvidia remained flat in premarket trading on Monday. The stock closed the regular session on Friday at £378.31 per share versus a per-share price of £186.53 at the start of 2020. Nvidia had slid to as low as £152.70 per share in March when COVID-19 disrupted its business. Trading stocks online is easier than you think. Here’s how you can buy shares online in 2020.

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SoftBank executives suggest taking the company private

The deal, as per the experts, is likely to face opposition from rivals and regulators, since it can potentially help Nvidia create its monopoly in the chip industry. Immediately after the announcement, critics expressed concerns that under U.S. ownership, Arm will fail to keep its open approach, especially considering the rising tensions with China.

SoftBank had acquired Arm in 2016 for £24.88 billion. CEO Masayoshi Son strengthened Arm’s position in the market in recent years, but is now offloading several stakes to shore up finances.

The news comes only weeks after SoftBank executives expressed concerns over its faltering stock. They had also suggested taking the company private as a potential remedy. According to the analysts, the prospect could be further explored after the completion of SoftBank’s agreement with Nvidia.  

SoftBank will get a 6.7% to 8.1% stake in Nvidia

As per the deal, Nvidia will pay £9.33 billion to SoftBank in cash and another £16.72 billion in shares. The agreement also entails SoftBank’s £77.75 billion Vision Fund getting a 6.7% to 8.1% stake in Nvidia. SoftBank’s stake in Arm currently stands at 25%.  

CEO Jensen Huang of Nvidia commented on Monday’s news and said that the Arm acquisition was pro competition. The deal will offer consumers a genuine alternative to Intel for the first time. Arm’s headquarters in Cambridge, Nvidia said, will be turned into a new centre for artificial intelligence research.

In its earnings report for the fiscal second quarter published in August, Nvidia said that its revenue from data centres jumped 167% on a year over year basis.

At the time of writing, Nvidia is valued at £233 billion and has a price to earnings ratio of 89.22.

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