ARM — the leading chip designer from the UK — filed for a listing on the NASDAQ. The IPO comes during a historically weak period for U.S. listings, suggesting that ARM’s shareholder, SoftBank, is looking to partially exit its position.
Back in 2016, Japan’s SoftBank — one of the biggest “cash dispensers” for startups — acquired ARM at a $32 billion valuation. Two years ago, Nvidia attempted to buy ARM from SoftBank, but regulators blocked the deal. It now appears that SoftBank has moved on to Plan B: taking ARM public through an IPO.
Back in 2016, Japan’s SoftBank — one of the biggest “cash dispensers” for startups — acquired ARM at a $32 billion valuation. Two years ago, Nvidia attempted to buy ARM from SoftBank, but regulators blocked the deal. It now appears that SoftBank has moved on to Plan B: taking ARM public through an IPO.
What is ARM and why is it important?
ARM is one of the key innovators in the semiconductor industry. The company creates IP blocks (or chip architectures) that serve as blueprints for chip design. In simple terms, ARM develops the “templates” from which companies like Nvidia, Qualcomm, AMD, and others design their own chips. For each chip sold (30 billion of them in the past year), ARM earns a royalty — roughly 10 cents per unit.
Up until the 2010s, the dominant architecture was Intel’s x86. However, it wasn’t well suited for mobile chips due to poor energy efficiency. ARM developed an architecture that proved ideal for mobile use. By 2023, nearly all smartphones (99%) were using ARM-based architectures.
The company was founded in 1990 as a joint venture between Apple and several other partners. Today, ARM employs around 6,000 people — mostly highly skilled engineers. Nearly half of the company’s revenue (44%) comes from its three largest clients: ARM China (24%), Qualcomm (11%), and Apple (9%).
Up until the 2010s, the dominant architecture was Intel’s x86. However, it wasn’t well suited for mobile chips due to poor energy efficiency. ARM developed an architecture that proved ideal for mobile use. By 2023, nearly all smartphones (99%) were using ARM-based architectures.
The company was founded in 1990 as a joint venture between Apple and several other partners. Today, ARM employs around 6,000 people — mostly highly skilled engineers. Nearly half of the company’s revenue (44%) comes from its three largest clients: ARM China (24%), Qualcomm (11%), and Apple (9%).
Leon’s View
In our opinion, it is not advisable to participate in the potential ARM IPO. According to Reuters, the expected IPO valuation exceeds $60 billion. However, ARM is currently showing declining revenue and a net loss this year — companies with such fundamentals are typically valued at 3–4 times annual revenue. Accordingly, we estimate ARM’s fair valuation in the range of $9–12 billion.