[Chip Talk] Riding the AI Boom, IPO Success Expected: UK Arm 'In the Spotlight'

Arm, the challenge is to convince it is an 'AI company'
NVIDIA anchor investment participation likely to help IPO success

There is growing attention on whether Arm, the UK semiconductor company regarded as the biggest IPO candidate worldwide in the second half of this year, can create a new legend in the IPO market. Amid the surge in artificial intelligence (AI) related stocks this year, the key question is whether Arm can leverage this market sentiment to lead a successful IPO.

Rene Haas, Arm CEO
Photo by Reuters Yonhap News

With the possibility of global semiconductor companies participating as key investors, expectations are rising that Arm's IPO, backed by numerous proprietary technologies, could lead to a new paradigm in the semiconductor industry.

◆ Market Expectations Rise... "To Succeed in IPO, Must Convince Investors It Is an AI Company"

The Wall Street Journal (WSJ) recently reported that the US IPO market is awakening, and there is growing anticipation that Arm’s IPO, expected to be launched as early as mid-September, could be a major hit. Arm is reportedly aiming for a valuation exceeding $50 billion (approximately 63.6 trillion KRW) through this IPO. Although the current market valuation range for Arm is broad, between $30 billion and $70 billion, some believe that depending on market conditions, its value could soar up to $80 billion.

The global AI boom that has swept the world this year is expected to be a significant positive factor for Arm’s IPO. With AI-related stocks rising in unison, if it is confirmed that Arm’s technology is linked to AI, the IPO is projected to be highly successful. Tim Culpan, a technology columnist at Bloomberg News, stated, "The challenge for this IPO is to convince investors that Arm, a semiconductor company, is an AI company," adding, "If it can package itself well with the market’s favorite buzzword (AI), the IPO could be the biggest success story of the year."

Arm, a fabless semiconductor design company, holds core technologies that form the basis for designing computer central processing units (CPUs) and smartphone application processor (AP) chips. With a 90% market share in mobile chip design, the company has recently expanded and developed its AI-related technologies, including capabilities in data center semiconductor design.

Ren? Haas, CEO of Arm, has been emphasizing Arm’s identity as an ‘AI company,’ stating that Arm’s technology is central to building AI applications. At an event in Taiwan last May, he introduced that Amazon’s AI voice assistant Alexa, Alphabet’s Google Pixel phone’s on-device (smart devices capable of collecting and processing information independently) and small-scale AI processors operate using Arm technology. While currently generating significant profits from mobile chip design, he is highlighting the company’s growth trajectory as an AI enterprise.

Arm’s parent company, Japan’s SoftBank, is also emphasizing the AI revolution. Masayoshi Son, chairman of SoftBank, who faced difficulties due to investment failures last year, expressed his keen interest in the AI revolution at the June annual shareholders meeting, emphasizing that computers and AI will surpass humanity. He declared, "We want to be the leaders of the AI revolution," and announced plans to invest 5 trillion yen (approximately 45.6 trillion KRW) in AI. Son, who has highlighted Arm as a core asset of SoftBank, is interpreted to be bolstering AI efforts with the IPO in mind.

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Arm is nicknamed the ‘Switzerland of the semiconductor industry.’ It has all major electronics competitors such as Samsung Electronics, Qualcomm, and Apple as clients, meaning it has no adversaries, similar to neutral Switzerland. Because of this, the industry is highly interested in Arm’s acquisition status and investor lineup.

[Image source=Reuters Yonhap News]

When SoftBank was pushing to sell Arm before the IPO, this interest was intense. SoftBank, which acquired Arm in 2016, initially planned to transfer its stake to US company Nvidia for $40 billion in 2020 and proceeded with the process. However, it faced opposition from the industry and major governments, resulting in a failed sale in February last year. Subsequently, news emerged that Intel, Qualcomm, Samsung Electronics, and others were jointly pursuing acquisition of Arm, alongside reports of an IPO planned in London. However, the semiconductor market faced difficulties last year due to post-pandemic demand decline, inflation, and recession concerns, leading to the collapse of the joint acquisition and postponement of the IPO.

Now, the market is showing great interest in reports that global semiconductor companies are negotiating to become anchor investors in Arm. In June, foreign media reported that US semiconductor company Intel, Taiwanese foundry TSMC, and Alphabet were negotiating with SoftBank to become anchor investors in Arm. Following this, early this month, news surfaced that Nvidia, which had previously attempted to acquire Arm, is negotiating to participate as an anchor investor. If Nvidia, a leading AI-related stock, directly joins as an anchor investor, it is expected to have a direct positive impact on Arm’s IPO success.