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SoftBank has bought UK-based chipmaker Graphcore, as the Japanese tech group founded by Masayoshi Son accelerates its multibillion-dollar push into artificial intelligence.
Graphcore, an AI-focused start-up that was founded by UK semiconductor industry veterans in 2016, will sit alongside chip designer Arm in SoftBank’s portfolio, as Son readies his “next big bet” in the tech industry.
“Graphcore will join SoftBank Group to build the next generation of AI compute,” said Nigel Toon, chief executive and co-founder of Graphcore. He said he had conversations with all levels of SoftBank before the deal was agreed: “We are part of the delivery behind a very grand vision.”
The money to buy Graphcore is coming from SoftBank Group itself, rather than its Vision Funds, reflecting the strategic nature of the investment.
“With the advent and the acceleration of AI, what’s going to be critical is the foundation layers — not just the models but all the infrastructure around it, including on the semiconductor and systems side,” said Vikas Parekh, a San Francisco-based SoftBank executive who led the investment.
“The profit pools will grow longer term, and we expect that lots of players will develop solutions and participate in that pool,” Parekh added.
Pitched as a rival to Nvidia, which dominates the market for high-performance AI chips, Graphcore’s “intelligence processing units” are designed for the specialised requirements of AI applications.
But it has struggled to commercialise its technology, generating just $2.7mn in sales and $205mn in pre-tax losses in 2022, the most recent year for which Graphcore’s accounts are publicly available. The company warned last October that it needed to raise new capital within months.
Neither SoftBank nor Graphcore would confirm the value of the deal. Two people familiar with the matter said it was just above $600mn, less than the roughly $700mn that the company had raised in venture capital.
That would be an anticlimax for Graphcore’s investors, who had valued it at around $2.5bn in 2020. Backers include Microsoft, OpenAI’s co-founder Ilya Sutskever, Molten Ventures, Atomico and Baillie Gifford.
Toon — who along with his co-founder and chief technology officer, Simon Knowles, is staying on after the deal — said that the company’s biggest issue was a lack of scale and capital.
SoftBank will provide Graphcore with a “huge amount of resources” to take on US chipmaking giants Nvidia and AMD, he said, adding “quite significantly” to its UK headcount. Its headquarters will remain in Bristol.
Armed with billions of dollars, Son wants to position SoftBank at the centre of what he considers to be humanity’s next evolutionary stage and support its crown jewel, Arm.
Arm, the UK-based chip designer in which SoftBank holds a roughly 90 per cent stake, has more than tripled in value since its initial public offering last September, as investors see it taking a more central role in the AI boom.
“We will be co-operating across the whole SoftBank family,” Toon said, without giving details of any potential collaboration with Arm. It declined to comment.
The deal closed after receiving the required regulatory approvals in the UK and US, as well as national security clearance from the British government, Toon said.
Ahead of the deal, Graphcore decided to exit its China business — where it had worked with companies including Baidu — after US export controls on AI chips had made working there “very difficult”, Toon said. Graphcore and SoftBank will now focus on AI customers in the US and Europe.
Last month, Son told shareholders that investments SoftBank had made in the past — including some high-profile losses, such as desk sharing start-up WeWork — were “just a warm-up” for his grand ambition to create an era of AI.
Dealmaking is also picking up. SoftBank in May led an investment of more than $1bn in UK self-driving car start-up Wayve, marking Europe’s largest AI deal to date.
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