SoftBank's latest acquisition has sent ripples through the technology sector: the Japanese tech investment giant has formally taken over Graphcore, a UK-based AI chipmaker. While the exact terms of the deal remain undisclosed, it’s widely reported to be valued around $600 million – marking a significant chapter in the unfolding saga of AI chip technology.
The acquisition, on one hand, underlines SoftBank’s aggressive push into the burgeoning field of artificial intelligence. On the other, it marks a bittersweet transition for Graphcore, a company initially heralded as a potential rival to Nvidia, the undisputed leader in AI chip manufacturing.
Founded in 2016 in Bristol, Graphcore's mission was always ambitious: to create a new breed of processors named Intelligence Processing Units (IPUs). Unlike traditional graphics processing units (GPUs) that Nvidia and others produce, IPUs are engineered specifically for AI workloads. By 2020, the company had reached a staggering valuation of nearly $3 billion, backed by heavyweights such as Microsoft and Sequoia. But despite such high expectations, Graphcore struggled to maintain its momentum. Losses mounted, culminating in revenue figures that paled in comparison to its expenses.
In an early morning press briefing on Thursday, Graphcore CEO Nigel Toon expressed reluctance to divulge specific financial details of the acquisition. “We have agreed with SoftBank that we’re not going into the details of the deal; whether anything comes out in the future, we’ll see,” he said. Toon did, however, stress that commonly cited figures of $500 million were inaccurate.
Yet, for all its challenges, Graphcore remained a technological marvel. Its IPUs reportedly outperformed Nvidia’s top-line GPUs in certain benchmarks, drastically speeding up processes like drug discovery. However, the dizzying pace of technological advancement took a toll on the relatively small company. “We’ve been thinking about this and what’s required for a long period of time, and we’ve probably been one of the early thinkers in the whole space. The speed at which this has taken off, and the scale involved, surprised us,” Toon admitted, reflecting on Graphcore’s journey.
SoftBank, a veteran in the semiconductor market having previously acquired the British chip designer Arm, appears poised to usher Graphcore into a new era. Nigel Toon emphasized that the acquisition would not lead to layoffs. On the contrary, the company expects to expand its workforce significantly in the UK. The sentiment was echoed by Simon Knowles, Graphcore’s CTO and co-founder, who reiterated their commitment to continue leading the company’s innovative endeavors.
Despite the optimistic outlook, the acquisition is seen as a sobering reminder of the high stakes in AI technology. A sector where high capital expenditure and rapid innovation cycles can make or break even the most promising startups. “This is a level of investment which is utterly massive,” Toon noted, underlining the scale of systems required for AI operations, comprising thousands of interconnected AI processors, advanced networking, and cooling infrastructures.
SoftBank’s previous bet on Arm proved lucrative, with Arm's value having tripled since going public, largely driven by the excitement surrounding the AI market. SoftBank’s owner, Masayoshi Son, aims to replicate this success with Graphcore. His vision is clear: establish SoftBank as a vital player in the AI chip market currently dominated by Nvidia. Vikas J. Parekh, Managing Partner at SoftBank, sees this acquisition as pivotal. “Society is embracing the opportunities offered by foundation models, generative AI applications, and new approaches to scientific discovery. Next-generation semiconductors and compute systems are essential in the AGI journey; we’re pleased to collaborate with Graphcore in this mission.”
Graphcore’s financial struggles were evident in its 2022 figures. Revenues dwindled to a mere $2.7 million against operating expenses of $206.8 million. The failed expansion into China due to US export restrictions exacerbated these challenges, forcing the company to seek new paths for sustenance. Toon acknowledged the financial difficulties but emphasized the potential for a turnaround with SoftBank’s robust support.
With the necessary regulatory approvals secured, the acquisition process was smooth. All antitrust, security, and investment scrutiny were promptly satisfied, marking a meticulous yet quick transition under the UK’s National Security and Investment Act. This operational readiness suggests strategic planning and collaboration that bode well for the future synergies between Graphcore and SoftBank.
So what lies ahead for Graphcore? As a SoftBank subsidiary, the company retains its name and headquarters in Bristol, along with additional hubs in Cambridge and London in the UK, and offices overseas. The integration into SoftBank’s vast tech ecosystem promises new horizons. While the AI chip industry remains fiercely competitive, the fusion of SoftBank’s financial muscle and Graphcore’s innovative prowess holds promise. Whether Graphcore can now achieve the lofty heights once envisioned is a question that only time will answer.
As Nigel Toon summed up, the acquisition brings mixed emotions but remains a strategic milestone. “We’re sorry about some former employees not participating in the ongoing developments, but for all current employees and investors, this is a positive outcome. We’re in a good place moving forward.”