Masayoshi Son’s SoftBank is reportedly looking to directly compete with Nvidia in the AI-chip boom.
As the share prices of Arm and Nvidia have demonstrated in the last month—they’re up 63% and 26% respectively over that period—the chip sector is arguably where the action is these days. And the excitement continues to ratchet up.
The biggest (in money terms) news came on Friday, when Bloomberg reported that Masayoshi Son’s SoftBank planned to attack Nvidia head-on with a new AI chip venture, for which Son was hoping to raise $100 billion. Of that sum, $30 billion would apparently come from SoftBank and $70 billion from Middle Eastern institutions. The venture is reportedly codenamed Izanagi, in reference to the Japanese creator deity. SoftBank used to have a $3.6 billion stake in Nvidia, but dumped it all at the start of 2019, and now wants to create a rival.
The Izanagi news sent SoftBank’s share price up by nearly 5% today. If the plan comes to fruition, it will be interesting to see any alliance between it and Arm, in which SoftBank has a 90% stake. As Arm’s chip designs have become crucial to chipmakers such as Nvidia, Arm risks raising antitrust concerns if it partners with any chipmakers. Just ask Nvidia, whose planned $40 billion takeover of Arm collapsed two years ago in the face of regulatory scrutiny. (Nvidia did however recently take a $147 million stake in Arm, which currently enjoys a market cap of $132 billion.)
SoftBank’s big chip play is yet another indicator of its pivot from funding startups—which mostly turned out pretty badly—to focusing on semiconductors. The company is awash with cash, thanks to both a windfall stemming from the 2020 merger of T-Mobile US with SoftBank’s Sprint, and the sudden rise in Arm’s fortunes. (It may or may not be worth noting at this point that SoftBank is among the rumored potential buyers for the U.K. AI-chip firm Graphcore, which is hemorrhaging money and desperately seeking a way out.)
As for looking to the Middle East for the rest of Izanagi’s funding…well, that sounds familiar. OpenAI CEO Sam Altman is doing the same thing for his proposed, supposedly multi-trillion-dollar AI-chip venture, and Bloomberg reported Friday that he’s seeking the U.S. government’s blessing, for a couple reasons. First, there’s a likelihood of major Middle Eastern backing sparking a national-security review. Second, if this ends up being a separate venture from OpenAI but OpenAI ends up being a customer or competitor, Altman could place himself in a conflict of interest that might attract antitrust scrutiny.
Speaking of the U.S. government, the Biden administration is starting to hand out the first really enormous piles of subsidies under the 2022 CHIPS Act, to stimulate semiconductor manufacturing on American soil. (Microchip Technology has already been awarded $162 million, and BAE Systems $35 million.) Today, the government announced it had signed preliminary terms with GlobalFoundries, in which the giant chipmaking contractor will receive $1.5 billion to build out and modernize its U.S. production capabilities. And Bloomberg reports that Intel may receive $10 billion to support the onshoring of some of its manufacturing.
Even if the up-to-$7 trillion Altman is reportedly seeking for his chip venture is fantasy money, the real sums in play these days are eye-watering enough. More news below.
https://fortune.com/2024/02/19/softbank-ai-chips-nvidia-altman-globalfoundries-intel/amp/
