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SoftBank has bought UK-based chipmaker Graphcore because the Japanese technology group founded by Masayoshi Son accelerates its multi-billion dollar foray into artificial intelligence.
Graphcore, an AI-focused startup founded in 2016 by veterans of the British semiconductor industry, will join chip designer Arm in SoftBank's portfolio as Son prepares his “next big bet” within the technology industry.
“Graphcore will join SoftBank Group to develop the subsequent generation of AI computers,” said Nigel Toon, CEO and co-founder of Graphcore. He said he had discussions with all levels of SoftBank before agreeing the deal: “We are a part of the implementation of a really big vision.”
The money for the acquisition of Graphcore comes from SoftBank Group itself and never from its Vision Funds, reflecting the strategic nature of the investment.
“As artificial intelligence emerges and accelerates, the foundational layers are going to be critical – not only the models, but all of the infrastructure around them, including on the semiconductor and system side,” said Vikas Parekh, a San Francisco-based SoftBank executive who led the investment.
“The profit pools will grow in the long run and we expect many players to develop solutions and take part in this pool,” Parekh added.
Graphcore is taken into account a competitor to Nvidia, the market leader in high-performance AI chips, and its “Intelligence Processing Units” are designed to fulfill the precise requirements of AI applications.
However, the corporate has struggled to commercialize its technology. In 2022, the last yr for which Graphcore's financial statements are publicly available, the corporate generated just $2.7 million in revenue and $205 million in pre-tax losses. The company warned last October that it will need to boost recent capital inside months.
Neither SoftBank nor Graphcore would confirm the worth of the deal, but two people accustomed to the matter said it was just over $600 million, lower than the roughly $700 million the corporate raised in enterprise capital.
That can be an anticlimax for Graphcore’s investors, who valued the corporate at around $2.5 billion in 2020. Backers include Microsoft, OpenAI co-founder Ilya Sutskever, Molten Ventures, Atomico and Baillie Gifford.
Toon, who will stick with the corporate after the deal together with co-founder and chief technology officer Simon Knowles, said the corporate's biggest problems are its lack of scale and capital.
SoftBank will give Graphcore “huge resources” to tackle US chip giants Nvidia and AMD, he said, and can increase its UK workforce “quite significantly”. Its headquarters will remain in Bristol.
Armed with billions of dollars, Son desires to put SoftBank at the middle of what he sees as humanity's next evolutionary stage and support its crown jewel arm.
The value of UK-based chip designer Arm, during which SoftBank holds a roughly 90 percent stake, has greater than tripled since its IPO last September as investors expect the corporate to play a more central role within the AI boom.
“We will work with all the SoftBank family,” Toon said, without giving details of a possible collaboration with Arm. The company declined to comment.
The deal was accomplished after the needed regulatory approvals within the UK and US and national security clearance by the British government, Toon said.
Ahead of the deal, Graphcore had decided to exit its China business, where it had worked with corporations corresponding to Baidu, after U.S. export controls on AI chips made working there “very difficult,” Toon said. Graphcore and SoftBank will now deal with AI customers within the U.S. and Europe.
Last month, Son told shareholders that SoftBank's past investments – including some spectacular losses, corresponding to in desk-sharing start-up WeWork – were “only a warm-up” for his grand ambition to usher in an age of artificial intelligence.
The variety of contracts signed can be increasing. In May, SoftBank invested over a billion dollars within the British start-up Wayve, which develops self-driving cars. This is the biggest AI deal in Europe so far.
