News

When SoftBank Group-owned chip designer Arm files for a Nasdaq IPO, investors are eager to know if the company can achieve “exponential growth” as touted by CEO Masayoshi Son. Arm has been positioned as SoftBank’s cornerstone AI asset since its acquisition in 2016, with Son envisioning its crucial role in the AI sector. Although Son has provided limited details, investors are hopeful that the IPO filing will shed light on SoftBank’s AI strategy and whether Arm is worth its pre-IPO valuation of billion.

Arm’s past performance has not entirely lived up to Son’s previous claims. When SoftBank acquired Arm in 2016, Son predicted that Arm-designed chips would power all objects connected to the internet in the era of the Internet of Things (IoT). However, IoT revenues make up only a fraction of Arm’s overall revenue, a fact that analysts caution against overlooking.

While Arm may not be at the center of the AI boom, it has a significant presence in the AI-adjacent market. Kirk Boodry of Astris Advisory Japan notes that Arm’s role is more on the software and platform side, rather than directly involved in the development of large language models like ChatGPT. Analysts estimate Arm’s value to be around billion, suggesting that SoftBank’s billion valuation was partly motivated by rewarding its Vision Fund limited partner investors.

Contrasting Arm’s position, graphics chips specialist Nvidia has emerged as a major player in the AI market, with its advanced semiconductors powering data centers for large language models. Arm can ride on Nvidia’s success to some extent because Nvidia’s chips require energy-efficient central processing units (CPUs), which is Arm’s specialty. However, the competition is fierce, as there are many alternatives in the market.

While other companies such as Qualcomm and Apple have designed chips for AI processing, Arm’s opportunity lies in the shift of AI and machine learning from central cloud servers to end-user devices like phones, home appliances, and machinery components. Arm’s successful development of specific intellectual property for various architectures in the past positions the company well for this emerging market.

Analysts also question Son’s claim that 85% of SoftBank’s portfolio companies are AI-related. While many of these companies may adopt and apply generative AI, they may not be categorized as true AI companies. The potential for AI synergies within SoftBank’s portfolio remains uncertain.

The Arm IPO filing is anticipated to provide more insight into SoftBank’s AI strategy and Arm’s true value in the AI market.

Editing by Edwina Gibbs

The post SoftBank’s Arm IPO to Reveal AI Strategy and Value appeared first on satProviders.