On Sunday, graphics card and computer technology company NVIDIA ($NVDA) announced it would acquire computer chip company Arm Holdings from parent company Softbank for $40 billion in one of the largest acquisitions in recent memory. The acquisition would turn the already massive NVIDIA into one of the largest computer hardware companies in the world, expanding its repertoire from GPUs and mobile computing to computer processors and beyond. According to NVIDIA’s statement, Arm will operate as a subsidiary and keep its UK offices and clients, and its intellectual property will remain in the UK.
Anyone reading about this deal unfamiliar with computer parts will probably have the same questions I had when I built a computer earlier this summer: What in the world are GPUs and CPUs, and why are the companies making them worth $40 billion?
In short, a GPU is a graphics processing unit (called a “graphics card”) and a CPU (often just called a “processor”) is a central processing unit. Think of a CPU as the brain of a computer; there’s one in almost every computer from your laptop to your phone to the touch screen in your Tesla. This is what Arm is known for developing. A GPU, on the other hand, is sort of like the computer’s muscle and is used to process images on the screen but is increasingly being used for AI technologies as they are useful for processing large volumes of data at high speeds. These are generally what make up NVIDIA’s bread and butter.
NVIDIA’s greatest competitors in the computing space are AMD and Intel, both of which produce graphics cards and processors of their own. Intel is perhaps the company most synonymous with the processor - if you’re reading this on a Macbook right now or on most Windows computers, the odds are that your machine is running on an Intel chip - although more companies like Apple are beginning to develop their own processors. AMD, however, has given Intel a run for its money with its own powerful Ryzen line of processors and is also pressuring NVIDIA with its Radeon line of graphics cards.
On the consumer end, the market for PC components fluctuates dramatically and there is steep competition between the three companies. But much of their revenue also comes from contracts and deals with other computing, automobile or mobile manufacturers.
At present, Intel stands high above NVIDIA and AMD’s headcount as the two smaller but formidable competitors stay neck-and-neck. Though Arm will remain its own entity, should the deal go through, such a major venture into CPU technology could help propel NVIDIA to a size comparable with Intel. The rate of innovation in PC components is incredibly high, and yearly updates to technology often have major implications across the industry. With such a powerful computing company as Arm under its belt, NVIDIA could scoop up some of the contracts (and consumer eyes) that often drift towards AMD and Intel when thinking about a processor.
There are some early concerns, however, that the deal may not go through. According CNN Business, the acquisition must be approved by several world governments and could get hung up in China. Chinese media has apparently been quick to speak out against the deal, which would likely secure American firms’ place at the top of the computing food chain. A similar $44 billion acquisition was also blocked as recently as 2018.
Should the deal be broken apart, it’s uncertain what Softbank would ultimately do with Arm. Softbank has floated the idea of an IPO or a sale for several months now, as Arm is one of the top-performing companies in the Vision Fund and the company is trying to recoup its 2019 losses.
There is still a great deal up in the air with NVIDIA’s attempt to buy Arm, but should the deal go through, it would secure NVIDIA as a titan of computing from that day forward.
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