What’s up with… Arm’s IPO, AI chips & Nvidia, Brsk

  • Arm has filed its IPO papers
  • Nvidia’s stock rises as AI chips get even hotter 
  • UK altnet Brsk lands £156m in debt financing

In today’s industry news roundup: UK chip designer Arm has filed its IPO papers ahead of a planned September flotation but at an as yet undetermined valuation; Nvidia’s stock is soaring and will be due an even greater boost if Gartner’s forecast for the AI chip sector is accurate; vowel-averse UK fibre broadband altnet Brsk gains access to further funds as it builds out its high-speed network; and more!  

The staff at Arm, the highly successful Cambridge, UK-headquartered microchip-design company, are probably as unhappy as many other people in Britain at confirmation of its intent to float on the Nasdaq in New York next month rather than on the London Stock Exchange (LSE). Arm, currently owned by Japanese giant Softbank, designs semiconductors for a huge range of devices, including smartphones as well tablets, laptops, games consoles, autonomous vehicles, drones and other high-tech products. Its model of designing the components of microprocessors for other companies to build is very lucrative: Arm not only owns the designs and the architecture of their instruction sets, but also licences the intellectual property (IP) for these components and their instruction sets to other companies. That allows Arm’s customers to build systems around Arm designs and incorporate their own. The likes of Apple, Qualcomm, Samsung and the Taiwan Semiconductor Manufacturing Company (TSMC), the world’s biggest maker of microchips, have used Arm’s architecture and its chip designs have been incorporated into more than 250 billion devices (and counting). News of the New York IPO was not unexpected: Arm had announced back in March this year that it would not list on the London Stock Exchange and had opted for the US instead, and now it has filed the necessary registration documentation with the US Securities and Exchange Commission (SEC) authorities and with the Nasdaq. However, what it has not yet done is to reveal the number of shares that will be available for purchase or the price per share at which the IPO will be set. There has been much hoo-hah to the effect that the launch will be the biggest listing of 2023, and it is known that Arm’s advisors have upped the company’s valuation target to between $60bn and $70bn. Quite how the valuation has risen to such stratospheric levels is not readily apparent but, as the old saying has it, there’s many a slip twixt cup and lip and while the new valuation could be bang on target, and may even be exceeded, whisper it not in Gath, but there’s also a good chance that might actually come in below expectations. Arm’s filing with the Nasdaq shows that 30.6 bn of its designs were used in the twelve months to March 31, this year, up from the 29.2bn recorded in the year before. Despite the increase, revenues stayed flat at $2.7bn, and net income dropped from $676mn to $524mn. Arm reckons the microprocessor market will grow by 6.8% next year and into 2025. Interestingly, the filing also reveal that Arm generates 25% of its revenues from China and the company accepts that its marked reliance on the Chinese market renders it “particularly susceptible to economic and political risks” when the US, the UK, Europe and other parts of the world are preventing Chinese access to leading-edge microprocessor technologies, telcos are ripping out Chinese comms technologies, and consumers are shunning Chinese products. Arm was founded in 1990 and quickly took its place in the prestigious FTSE100 list of companies. It has long been cited as the ‘crown jewel’ of UK technology companies and was listed on both the LSE and the Nasdaq before being taken private in 2016 when it was sold to Softbank for £23.4bn. Now, shares in that crown jewel are once again to be traded on the public exchange, though this time in America only, and Arm will soon be just one more very successful British enterprise to go the way of other home-grown tech companies – across the Atlantic. Earlier this year the UK Prime Minister, Rishi Sunak, intervened in an attempt to persuade Arm to float in London, but to no avail. Arm said that a US listing would be the “best path forward” because the US Stock Exchange has a history of offering higher company valuations than does the LSE. So off to the US it goes, although the company’s CEO, Rene Haas, an American who works out of offices in California, insists that Arm will remain headquartered in the UK, operations will continue to be Britain-based, and the all-important “material IP” will stay sequestered in England. Haas has been awarded $20mn in Arm stock and will get another $20mn in cash if the listing carries forward to completion. And as to the future, maybe the next jewel to go will be the Koh-I-Noor diamond, one of Britain’s actual crown jewels. It would fetch a pretty penny – conservative estimates put its value at upwards of £20bn and almost no-one would notice if a paste replica took its place on the crown of the late Queen Elizabeth, the Queen Mother.

The red hot AI chip sector is set to grow in value by 20.9% this year, according to Gartner, which expects global revenues from semiconductors designed to execute AI workloads to reach $53.4bn in 2023. “The developments in generative AI [GenAI] and the increasing use of a wide range AI-based applications in datacentres, edge infrastructure and endpoint devices require the deployment of high-performance graphics processing units (GPUs) and optimised semiconductor devices. This is driving the production and deployment of AI chips,” explained Alan Priestley, VP analyst at Gartner. Unsurprisingly, the sector’s growth won’t end this year… AI semiconductor revenues are predicted to rise by 25.6% in 2024 to $67.1bn and by 2027 the sector is expected to be worth $119.4bn, more than double the size of the market in 2023. According to Priestley, many enterprises will turn to large-scale deployments of custom AI chips in the future, replacing the current predominant chip architecture of discrete GPUs, especially for workloads based on GenAI techniques. Find out more.

The Gartner forecast spells good news for current AI chip sector leader, Nvidia, which already commands a market capitalisation of almost $1.2tn. That valuation has been boosted significantly in recent days as the company’s share price has soared ahead of its upcoming earnings announcement on 23 August, during which analysts expect the company to share even better than anticipated sales growth forecasts, reports Reuters. Nvidia’s share price ramped by almost 8.5% to $469.67 on Monday and looks set to head north again during trading on Tuesday. The company’s stock has gained by 228% since the beginning of the year, when investors could have snapped up Nvidia shares for $143.15. On average, Wall Street analysts are expecting Nvidia to report revenues of $11.2bn and non-GAAP earnings of $2.07 for the quarter that ended in July, and revenues of $44bn and non-GAAP earnings of $8.08 for the full financial year.   

And, as an aside, it’s worth noting that Arm is going through an IPO process right now because early last year regulators blocked the planned $66bn acquisition of the UK chip design company by… Nvidia! See Ouch! NVIDIA finally loses in Arm wrestling contest. 

UK fibre broadband altnet Brsk has secured an additional £156m in debt financing from Ares Management to help fund its network rollout, taking its total debt facility from Ares to £259m. The additional capital will enable Brsk to expand its network to reach 1 million premises by 2026, the company noted in this announcement. Currently, Brsk’s network passes 250,000 homes in the West Midlands, Manchester and broader Lancashire areas of England, and has 14,000 paying customers connected. “With support from Ares, our network has grown almost fivefold – we couldn’t be happier working with like-minded financing partners to make it possible,” noted Giorgio Iovino, co-founder of Brsk. “Securing this funding is a significant milestone in clearing the runway for us to take full fibre broadband to 1 million homes,” he added. 

The UK’s Competition and Markets Authority (CMA) is proving a thorn in Microsoft’s side, as the regulator, having previously extended its deadline to consider the evidence for whether the technology giant should be allowed to acquire gaming giant Activision Blizzard for $69bn, decided it doesn’t like the original deal and has blocked it. So now Microsoft and Activision have submitted a new, restructured deal for the CMA to consider, and the regulator will announce an initial ruling on the new deal by 18 October. “Under the restructured deal, Microsoft will not acquire cloud rights for existing Activision PC and console games, or for new games released by Activision during the next 15 years (this excludes the European Economic Area). Instead, these rights will be divested to Ubisoft Entertainment SA (Ubisoft) prior to Microsoft’s acquisition of Activision,” noted the CMA. Read more

Philippine operator Globe announced it has nearly halved banking-related scam and spam messages in its network for the first half of 2023. In the period between January and June this year, the number of such fraudulent messages has fallen to 4.85 million, down 46% from the 9.06 million scam and spam SMS transmitted during the same period in 2022. Anton Bonifacio, Globe’s chief information security officer, said the telco has been able to achieve the significant reduction thanks largely to its strategic partnerships with financial institutions and regulators. Its collaborators against online fraud include the Bankers Association of the Philippines (BAP) as well as major banks, with their joint efforts aimed at facilitating “a more efficient alerting mechanism, seamless data-sharing and expeditious filtering of fraudulent activities”, the company stated. Globe said it also “consistently invests in advanced technologies” and initiates channels to streamline the reporting of spam and scam messages and to filter them out of its network.

- The staff, TelecomTV

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