With the initial public offering (IPO) of ARM inching closer, the surging demand for chips in the AI frenzy has escalated the market's target valuation for ARM, now exceeding $60 billion.
On August 2, Bloomberg cited informed sources saying that SoftBank's chip design company, ARM, could go public as early as September with a valuation between $60 billion and $70 billion. The sources stated that the roadshow would kick off the first week of September, followed by IPO pricing the next week.
Data compiled by Bloomberg indicates that this IPO could potentially be the largest globally this year.
The insiders mentioned that ARM's executives are still hopeful for a valuation of $80 billion, but there's uncertainty about reaching this target. Previous reports have suggested that ARM aims to raise up to $10 billion through its IPO.
Wall Street investment banks previously estimated that due to macroeconomic and semiconductor industry cyclic factors, ARM's listing valuation would fall within a range of $30 billion to $70 billion, with a median value of just $50 billion. This figure is lower than the $60 billion valuation target proposed by SoftBank last year.
Analysts pointed out that since Rene Haas took over as CEO of ARM last year, the company has been working to expand beyond the smartphone market. The current focus is on data center chips that can be used in cloud computing and artificial intelligence applications. These chips, targeted at this particular market, command the highest prices and highest profits in the industry.
Reportedly, Amazon Web Services (AWS) is using chips based on ARM's design.
Bob O'Donnell, President and Chief Analyst at TECHnalysis Research, stated indirectly that ARM had played a crucial, albeit behind-the-scenes, role for a long time. Now, awareness of ARM's business and the role it plays has increased.
ARM: SoftBank's "Last Hope"?
UK semiconductor company ARM is a leading chip architecture design company globally. Its designs are used by NVIDIA, Qualcomm, AMD, Apple, Samsung, Huawei, and others, including Apple's A-series chips and Huawei's Kirin series chips.
In 2016, SoftBank bought ARM for $33 billion and tried unsuccessfully to sell it to NVIDIA in 2021. Since then, SoftBank has been planning to take ARM public.
Over the past year, SoftBank suffered significant losses as the value of its tech investments was hit hard by a downturn in the industry. However, ARM's performance is still growing rapidly and is seen as the next high-quality asset after Alibaba, which could potentially boost SoftBank's performance.
Amir Anvarzadeh, a strategist at research firm Asymmetric Advisors, suggested indirectly that the rise in ARM's valuation "could really save SoftBank from its past disastrous investments."
Paul Golding, an analyst at Macquarie, recently reported that Masayoshi Son's bet on ARM seems to be a "wise move" as SoftBank's future and stock price "now entirely depend on ARM and Vision Funds." The Vision Fund 1 owns 25% of ARM.
SoftBank founder Masayoshi Son stated last February that he hopes ARM's listing will be the "largest ever" in semiconductor industry history.
Generally, it can boost market sentiment to secure a major investor before a company's IPO, attracting more participation in the IPO.
Previously, Bloomberg reported that Intel is discussing investing in ARM's IPO. If successful, this could imply broader business cooperation between the two companies.
Besides Intel, ARM is currently in discussions with at least ten companies, including Alphabet, Apple, Microsoft, TSMC, and Samsung Electronics.
On July 12, the Financial Times cited several informed sources stating that ARM is negotiating with NVIDIA to be a major investor in its IPO. Currently, NVIDIA is still discussing the valuation issue with ARM. NVIDIA hopes for a valuation between $35 billion and $40 billion, while ARM's expectation is closer to $80 billion. These negotiations haven't concluded yet, and NVIDIA might not invest at all.
