The Rise and Fall of SoftBank's Arm: A Billion Dollar Acquisition and the Quest for AI Dominance

Friday - March 1 2024, 04:54 UTC - 8 months ago

In 2016, Softbank acquired Arm for $32 billion and sold a stake to its Vision Fund. In 2023, SoftBank acquired the full stake from the Vision Fund, valuing Arm at $64 billion. After facing losses from its investment in WeWork, SoftBank shifted strategies, but later announced a $100 billion investment in a new AI chip company. SoftBank's journey with Arm showcases the continuous evolution and challenges of the tech industry.

In 2016, Japanese conglomerate SoftBank made headlines when it acquired UK-based semiconductor designer Arm for a whopping $32 billion. This marked one of the largest acquisitions in the tech industry at the time, solidifying SoftBank's position as a major player in the global tech market.

At the same time, SoftBank also sold a 25% stake in Arm to its own $100 billion Vision Fund for $8 billion. This move allowed SoftBank to offload some of the financial burden of the acquisition, while also keeping a significant stake in Arm's future success.

Fast forward to August 2023, and SoftBank announced that it would be acquiring the full 25% stake in Arm from the Vision Fund for around $16 billion. This move valued Arm at over $64 billion, nearly double its original purchase price. SoftBank continued to own 89.9% of Arm after the deal was completed.

However, just a few weeks after this deal, SoftBank announced yet another major investment in Arm. This time, the company revealed that it had a staggering $118 billion worth of Arm shares in its portfolio. This displayed SoftBank's unwavering confidence in the company's potential for growth and success in the tech market.

Despite this, SoftBank's investment strategy has faced its fair share of challenges. In November 2022, the company revealed that its cumulative losses on coworking startup WeWork had exceeded $14 billion. This caused widespread concern among investors and led SoftBank to shift its approach.

In 2022, SoftBank CEO and Head of the Vision Fund Masayoshi Son announced that the company would shift from making aggressive investments to focusing on defense, selling down stakes in companies like Alibaba to raise funds. However, just a little over a year later, Son changed his tune again. As the hype around artificial intelligence (AI) and its potential for revolutionizing industries grew, Son announced that SoftBank would go on the offensive once again, pursuing investments in AI-driven companies.

This shift in strategy was evident in SoftBank's recent announcement to raise $100 billion for a new AI chip company. This move, along with its continued investments in Arm, further solidifies SoftBank's drive to become a dominant player in the rapidly evolving tech landscape.

In summary, SoftBank's acquisition of Arm and subsequent investments in the company and the AI industry have solidified the conglomerate's position as a major player in the tech market. However, challenges and shifts in strategy demonstrate the volatile nature of the industry and the constant need for adaptability and innovation.