SoftBank acquires British AI chipmaker Graphcore

The deal provides Graphcore with resources to scale its operations

Japanese tech giant SoftBank Group has acquired Graphcore, a British AI chip developer, in a move designed to accelerate SoftBank's dominance in the booming AI industry.

Rumours of the deal had been swirling for months, but both companies remained tight-lipped until now.

Financial terms of the deal were not disclosed, but the Financial Times reported a purchase price of around $600 million, lower than the $700 million Graphcore had previously raised from investors.

Founded in 2016, Graphcore built a reputation as a potential rival to Nvidia, the dominant player in AI processing hardware. Graphcore's "intelligence processing units" (IPUs) are specifically designed for AI workloads, offering an alternative to Nvidia's graphics processing units (GPUs).

Despite early promise and backing from big names like Microsoft and Sequoia, Graphcore struggled to reach its full potential.

Missed cloud deals and a forced exit from the Chinese market due to US export restrictions further hampered its growth. The company reported a mere $2.7 million in revenue for 2022, coupled with significant losses.

With losses mounting and no new funding in sight, an acquisition seemed inevitable. SoftBank, already a major player in the chip industry through its ownership of Arm, emerged as the buyer.

SoftBank's acquisition provides Graphcore with the resources it needs to scale its operations and compete more effectively with Nvidia and other chipmakers.

Graphcore CEO Nigel Toon and co-founder Simon Knowles will retain their leadership positions.

The acquisition is a positive outcome for most of Graphcore, Toon said. No layoffs are expected, and the company plans to significantly increase its UK headcount.

SoftBank's financial muscle, combined with its experience in the chip industry, is likely to be a boon for Graphcore.

Toon believes SoftBank's backing will allow them to compete effectively.

"In SoftBank, we have a partner that can enable the Graphcore team to redefine the landscape for AI technology," Toon said.

"Demand for AI compute is vast and continues to grow. There remains much to do to improve efficiency, resilience, and computational power to unlock the full potential of AI."

Vikas J Parekh, Managing Partner at SoftBank Investment Advisers, highlighted the importance of "next-generation semiconductors" in achieving artificial general intelligence (AGI), adding that Japanese company was pleased to collaborate with Graphcore.

The acquisition could also lead to collaboration between Graphcore and Arm, potentially posing a more serious threat to Nvidia's dominance.

Regulatory hurdles were surprisingly low in this case. Both companies secured all necessary approvals in the UK, US, and other relevant jurisdictions.

Graphcore will operate as a wholly owned subsidiary of SoftBank, with its headquarters remaining in Bristol.

One negative aspect of the deal is the impact on some former Graphcore employees, with reports suggesting their stock options were wiped out.

Toon confirmed that current employees and investors fared better, but some former employees will not benefit from the deal.

"There are a number of ways you can structure M&A deals. Sometimes that means that former employees don't participate in what happens going forward, and unfortunately that's the case here," Toon told TechCrunch.

"We're sorry about that, but what I can say is, for all of Graphcore current employees, and the people who will be working with the company going forward, this is a great outcome for all of those. [And] it's a good outcome for our investors. They're all very happy."