Masayoshi Son’s Expensive A.I. Bet Is Going Public

The SoftBank CEO acquired U.K. chip designer Arm for $32 billion in 2016—the largest acquisition in the company's history.

Softbank Chairman Masatoshi Son Press Conference In Tokyo
SoftBank Group Corp. Chairman and Chief Executive Officer Masayoshi Son. Tomohiro Ohsumi/Getty Images

Arm, a U.K.-based chip designer owned by Japanese conglomerate SoftBank (SFTBF), has filed to go public on Nasdaq, as SoftBank CEO Masayoshi Son looks to test his bet on artificial intelligence in the public market after an attempt to sell Arm to chip giant Nvidia (NVDA) failed last year. Arm is a major player in the semiconductor industry specializing in designing and licensing high-performance CPUs and related technologies. Its CPUs are used in 99 percent of all smartphones in the world and increasingly computers and servers.

The company charges a licensing fee on every chip shipped that uses its technology. In a prospectus filing to the SEC Monday (Aug. 21), Arm said its technology was included in more than 30 billion chips shipped between March 2022 and March 2023. It is a supplier to some of the largest players in semiconductor and consumer tech, including AMD, Intel, Nvidia, Qualcomm, Samsung (SSNLF), Amazon (AMZN) and Alphabet (GOOGL), according to yesterday’s filing.

Arm is profitable but faces growth challenges as chip demand shifts. For the fiscal year ended March, it reported a net income of $524 million on $2.68 billion in revenue, according to the prospectus. However, net sales came at 4.6 percent lower than a year ago largely because of a slowing demand for smartphones.

In yesterday’s filing, Arm made the case its CPU technology will be essential for many A.I. applications, although large language models often use graphic processors, or GPUs, to run algorithms.

“Arm CPUs already run A.I. and ML workloads in billions of devices, including smartphones, cameras, digital TVs, cars and cloud data centers,” the company said in the filing. “The CPU is vital in all A.I. systems, whether it is handling the A.I. workload entirely or in combination with a co-processor, such as a GPU or an NPU.”

Arm said companies that are using its technology to run A.I. models include Alphabet, Meta (META), Nvidia, Mercedes-Benz and self-driving startup Cruise.

SoftBank’s largest acquisition in history

Arm used to be a publicly traded company until it was taken private by SoftBank in 2016 for $32 billion. It was the largest acquisition in SoftBank’s history but not a popular decision with SoftBank shareholders. The conglomerate’s shares fell more than 10 percent following the news. Masayoshi Son, known for his high tolerance for risks, said at the time he was betting on the future of tech.

“People think this was a stupid move,” Son told an audience at a company event in Tokyo in July 2016. “It’s easy to look at where your pieces are now and place the next one nearby. This one is 10, 20, 50 moves ahead.”

“I’ve been thinking about this nonstop for a year, and the answer I arrived at is Arm. It’s an important move. ARM will be the center of the center of SoftBank,” the chief executive said.

In 2020, SoftBank sought to sell Arm to Nvidia for $40 billion. The deal faced major pushback from regulators, including the Federal Trade Commission, who raised antitrust and national security concerns. The deal was eventually called off in February 2022.

It’s unclear how much Arm aims to be valued at its imminent Nasdaq debut. It will likely be one of the largest public listings this year in an otherwise sluggish IPO market.

Masayoshi Son’s Expensive A.I. Bet Is Going Public