Chip Frenzy: Tech Titans Pile into Arm’s Planned Blockbuster IPO
Big tech is prepping for an impending semiconductor debut that will likely be this year's biggest public deal. Already, the list of heavyweight anchor investors has become as long as one's proverbial Arm.
Arm, a leading British chip designer, is aiming to raise around $10 billion through an initial public offering (IPO) that could land as soon as next month. On August 8, Reuters reported Amazon is in talks with Softbank Corporation, the Japanese conglomerate that owns Arm, about what stake it may take in the deal.
Amazon joins a growing huddle of potential cornerstone investors that includes chip makers like Intel and TSMC as well as consumer tech brands like Apple and Google.
Tech titans see strategic imperatives to the deal.
Amazon, for instance, already collaborates with Arm on the AWS Gravitron processor for its Amazon Web Services (AWS) business. Deepening its partnership with the chip designer through the deal could solidify its lead position in cloud computing – it already holds roughly a third of the global market.
“Every big tech company that is an Arm customer or relies on Arm tech is being given the opportunity,” one person familiar with the matter told the Financial Times. “Amazon is one of them . . . There are about 10 [potential investors] that aren't public.”
Arm reached record revenues totaling $2.8 billion last year, with its sales growing 5.7% in the year to March. The firm, which profits from licensing its proprietary technology to chip makers, has expanded its revenue by around 70% since 2016, when Softbank took it over.
If its IPO arrives on schedule, it will easily make it the year's biggest market debut. Research firm Refinitiv says it will be the biggest deal since Technicolor Creative Studios, a French visual effects studio, was listed in Europe in September 2022 for $97 billion.
The mega deal could breathe fresh air into a still stultified IPO market.
The first six months of 2023 witnessed 63 IPOs in the U.S., only a marginal improvement from 51 in the same period last year. For comparison, 416 companies went public over the course of 2021- the hottest IPO year on record.
However, Arm may be an outlier. PitchBook analyst Kyle Stanford says it is too profitable and well-established for its IPO to act as a greenlight for new startups to enter the market.
“No VC-backed company is going to look at Arm and say, ‘Oh, Arm did it,'” Stanford recently told Yahoo Finance. “I don't think this is going to be the straw that opens the floodgates of IPOs.”
There are other big deals on the horizon. German footwear maker Birkenstock is rumored to be prepping for a launch in September, with the firm estimated to debut at around $8 billion.
Tech investors seeking deeper exposure to the semiconductor industry will want to keep a close eye on this impending mega deal.
