SoftBank Bids £400 Million for AI Startup Graphcore

The UK government's approval stands as the final hurdle before the anticipated acquisition of Graphcore by SoftBank is officially announced, according to a recent report. This development comes as a significant step in the ongoing negotiations between the two entities. However, the valuation placed on Graphcore in this deal falls notably short of the 'double-unicorn' status the company had achieved by the end of 2020, as evidenced by a US$222 million funding round that valued Graphcore at over $2.7 billion.

SoftBank, led by CEO Masayoshi Son and known for its majority ownership of processor IP licensor ARM Holdings plc based in Cambridge, England, has been at the forefront of this acquisition bid. The move to acquire Graphcore, a company facing its own set of challenges, was widely expected within industry circles. Reports had hinted at SoftBank's interest in Graphcore, signaling a potential strategic alignment between the two technology giants.

The scrutiny of this impending deal under the National Security and Investment Act was also on the cards, given the sensitive nature of the semiconductor industry and the strategic implications it holds for national security. With ARM, a key player in the UK semiconductor landscape, already under SoftBank's ownership, the acquisition of Graphcore could further consolidate the Japanese conglomerate's presence in the market.

Graphcore, a relatively young player in the semiconductor arena having been founded in 2016, has made significant strides in developing cutting-edge semiconductor chips known as intelligence processing units (IPUs). These IPUs are specifically designed to enhance machine learning capabilities within data centers, positioning Graphcore at the forefront of AI innovation. Despite raising substantial equity funding, the company has faced challenges in gaining market share, particularly against established competitors like Nvidia.

In its latest financial report for the year ending December 31, 2022, Graphcore disclosed a loss before tax exceeding US$200 million, with annual revenue amounting to US$2.7 million—a decline from the previous year's sales figures. The company also indicated the need for additional funding by the third quarter of 2023, hinting at potential financial constraints that may have catalyzed discussions around a possible sale of the business.