NVIDIA Could Clone ARM In-House For Less Than $40bn. Why Is It Paying That?
Seeking Alpha Analyst Since 2007
Paul Legato is a software engineer currently living in San Francisco, California. He holds a bachelor's degree in history and philosophy from the University of South Florida.
Summary
- NVDA is paying a staggering $40bn for ARM.
- Sure, ARM is a valuable and widely used architecture, but.
- It seems like NVDA could build a better ARM clone in house for $40bn.
- ARM's customer list is irrelevant to NVDA's cloud strategy.
- Is there a missing factor, or was this purchase a colossal mistake?
@grxbstrd pointed out that NVDA's CUDA, a popular API for parallel processing + its recent acquisition of Mellanox, a maker of ultra-high-speed networking gear + ARM makes a great formula for a new vendor of AI cloud services.
I think that's absolutely correct. Such a product would be amazing technically. It'll quickly find a wide user base among the many companies already running CUDA.
But... $40bn? That's a lot of money. Even for NVDA. What's the scaling factor here that makes ARM worth it?
Sure, ARM is beloved worldwide by "companies that need to buy nice system-on-a-chip designs to customize themselves." That market for base CPU designs is great to own, to be sure, but not directly contributory to a cloud AI play, and probably not worth 40bn. (In the longer term, the competing open source RISC-V architecture stands a good chance of torpeoding most of the value of owning the ARM architecture IP anyway.)
NVDA also happens to employ a lot of high end chip designers already. $40bn would allow them to hire many more. Why don't they build their own chip architecture in-house? It'd likely be better than ARM, and cost less.
Buying ARM for its technology seems unlikely, and yet buying it for its customer list seems irrelevant to the cloud strategy.
What's the missing factor here that makes ARM worth $40bn? Or is this acquisition actually not worth what they paid?
Analyst's Disclosure: I am/we are long NVDA.
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