Amazon (AMZN) is in talks to become an anchor investor in British chip designer Arm's IPO, according to Reuters. In addition to Amazon, NVIDIA (NVDA), Apple (AAPL), Intel (INTC), and Samsung (005930.KS) are among other rumored investors. Yahoo Finance Tech Reporters Allie Garfinkle and Dan Howley discuss the impact and importance of Arm's IPO for the company and the IPO market.
- Well, the hotly anticipated largest IPO of the year is reportedly getting a huge new investor. That is Amazon, which may become an anchor investor in the public offering of Arm, the British chip designer owned by Japan's SoftBank. All of this according to Reuters.
Amazon would join the likes of other reported investors, including Samsung, Intel, Apple, and Nvidia, the latter whose $40 billion purchase of arm was derailed last year by regulatory concerns. Arm primarily designs chips for smartphones. But investors may be betting on future growth areas like data centers and of course, artificial intelligence.
The IPO reportedly set for September it could give the company a massive 60 to $70 billion valuation. Let's get more on the IPO and its bigger significance, both for the IPO market and for big tech. Allie Garfinkle is here with us in the studio and Dan Howley is joining us remotely as well. Guys, thanks for being here.
So we've been-- I've been trying to sort of wrap my head around these various investors in Arm and sort of its bigger meaning. Allie, I'll start with you here. How should we be contextualizing this?
ALLIE GARFINKLE: So I think we should start with, Amazon. And we should remember that unlike a lot of tech companies that we think of as going to IPO, this is a giant profitable business. And it has a list of clients that would make most startups absolutely salivate, right?
Think about, for instance, Amazon as an investor in Arm. They've been trying to build up their semiconductor business. You have Intel, which has a deal for foundry work with them. Nvidia uses them in their Grace CPU. There's a whole world of companies that are already working with Arm.
So I think the thing I would say, Julie, as a place to start is this is part of the cosmic dance around chips and AI that we're seeing in tech at large.
- And so Dan, when we think about the intellectual property that a company like Arm has been able to tout, even as some of the filings about their relationship with SoftBank, which is very storied at this point in time. You know, how that really classified the company as a leading semiconductor intellectual property supplier, and then scalable components as well. Where do you think that the investor reception for a company like Arm would look like once they make their debut?
DAN HOWLEY: Yeah. I mean, that's going to be the interesting story here is to where the investor sees this company going. Let me just give you kind of a level set of where you'll find Arm stuff. They're virtually every smartphone you can think of. Whether that's coming from Qualcomm's devices or chips. Those are Arm-based. Apple, those are Arm-based. Samsung uses Qualcomm. Google uses Qualcomm smaller player, obviously, in the smartphone space.
So that means that it's in tablets. It's in smartphones. It's in laptops and desktops. Those are arm chips that Apple uses in its laptops and desktops. On the Windows side of things, Intel is still the big player. But their windows is trying to get low power PCs to be a bigger product. And so they've worked with Arm as well to get some of those chips into PCs.
They're also available on the server side of things. As Allie said, they work with Nvidia as far as the CPU. Not the GPU side. That's very important to point out. It's just the CPU side. Although Arm is trying to work on its own GPU.
So this is a company where they're already spread across the spectrum of devices. Vehicles, smart home stuff, smaller connected devices. It's everywhere. So this isn't a company where if you're an investor, you would say, oh, gee, this has got a huge chance for growth. Sure, I mean, as far as the AI boom goes, yes. But they're a company that already, as Allie said, does great business. They're profitable, and they've been around for quite a while.
So I think for the average investor, looking at an IPO, it's not something where you would jump on and say, boy, is this going to be the next Nvidia? Is it going to blow up like that? Perhaps, if they dive deeper into AI. Something that they're trying to position themselves as an AI play.
That's not really where the company is, though. But that's the way they want to position themselves. Maybe then that's where investors would look. But I don't think people should look at this and say, this is a brand new company by any stretch of the imagination.
ALLIE GARFINKLE: And I think kind of it's also important to really highlight this point Dan is making. Arm's business currently is semiconductor IP. It is not AI. This is not an AI play in the traditional sense where we're thinking of Nvidia as an AI play.
As they've sort of been trying to move towards going public, they have been saying things like on small devices, small scale AI processors. We can run stuff like that. But that is the future business. It's not an AI play today.
And kind of to that end, you know I'm looking at the banner. And I have talked to a lot of experts about this. Arm is completely singular. This isn't a VC-backed tech company in the traditional sense.
If you're looking for IPOs down the line, the real ones that are going to start a new tech IPO boom are going to be the instacart's of the world, the SpaceX's, the Stripes. Those are the ones that everyone is saying is really where all of this is going. However I think it is really important to say arm is still going to move the needle forward.
We're not going to see an IPO boom like we did in 2021. But it is going to be-- using the weather metaphor. It's not going to be a flood, but there's going to be a light rain.
- Well, I guess what we could also look at with all of those companies is the deal size and the raise that would be taken on. I mean, SpaceX, even private valuation that we've seen of all of those companies that were just listed on the screen, some of the largest that we have seen in history. And Arm included within that conversation, too.
So it's right to bring up whether or not this is going to bring a windfall of deals. But in terms of where we sit right now in the IPO market and 2023 far kind of Poehling in comparison to two years prior. As we know, many companies rushed into-- they look for a good environment where there is less choppiness, less volatility. And that is not necessarily this environment right now.
ALLIE GARFINKLE: No, it's not. You know, I've talked to some folks who believe that 2024, or early 2024, is when we're going to see some volume really return here, Brad. But you're right. It's a different environment. Money is more expensive. The environment is uncertain.
It's not exactly the moment that if you're sitting there and you're Stripe, you're thinking, this is exactly the moment I was thinking I wanted to go public. It's the sort of thing where I think there would be a lot of excitement around, say a Stripe or an Instacart. Because if for nothing else, it's disclosure, right?
We would see the business for the first time. In the case of Instacart, we would see how much of a business they really built during the pandemic. But for now, you're right. We're sort of just-- we're sort of in waiting, I would say.
- And in the case of Arm, we already know about the business, right?
ALLIE GARFINKLE: Yeah, because we know so much.
- In part because it's part-- well, it used to be publicly traded. But also as part of SoftBank, which is a public company. We get disclosures about its earnings. So that's not part of this.
ALLIE GARFINKLE: And Nvidia almost bought them for $40 billion.
- Yep, and then got shut down. All right. Thanks, guys. Allie and Dan, appreciate it.