British artificial intelligence (AI) chip firm Graphcore, once considered a potential rival to market leader Nvidia, has been bought by the Japanese conglomerate SoftBank. The deal marks another significant acquisition of a promising UK start-up by SoftBank, which previously acquired British chip designer Arm in 2016.
Acquisition Details
SoftBank has not disclosed the amount paid for Graphcore, but it is believed to be significantly less than the £2 billion valuation the UK company achieved after a financing round in 2020. The reported sale price is $500 million (£390 million). Graphcore head Nigel Toon described the acquisition as “a tremendous endorsement of our team.”
Concerns Over UK Tech Development
The acquisition raises questions about the UK’s ability to develop firms that can compete with the biggest players in the booming AI chip market. Ben Barringer, a technology analyst at Quilter Cheviot, expressed concern, calling it “another bitter blow” to UK financial markets. He noted that the sale comes at a time when London is seeking a blockbuster tech listing to reinvigorate its reputation as a global financial center.
Government Response
Science Secretary Peter Kyle welcomed the end of uncertainty for Graphcore and its employees, but acknowledged the need for more work to make the UK the best place to start and grow a business. Mr. Toon echoed this sentiment, stating that the deal showed UK firms could compete with big tech. He claimed that Graphcore went “toe to toe with the largest companies in this space with a much smaller team and much less capital.”
Future Prospects for Graphcore
Mr. Toon will remain as head of the company, and the acquisition is expected to lead to the hiring of new staff in Graphcore’s UK offices. The firm will now be a subsidiary under SoftBank but will remain headquartered in Bristol. Mr. Toon expressed optimism about the future, hoping for significant investment and progress for Graphcore in collaboration with SoftBank.
Graphcore’s Journey and Challenges
Graphcore was founded in 2016 by Nigel Toon and Simon Knowles. The company developed the Colossus series of computer chips, known for their powerful processing capabilities. Despite its promising start and high valuation in 2020, Graphcore has faced challenges, including slowing sales and the closure of offices in Norway, Japan, and South Korea in 2022. In 2023, major tech investor Sequoia Capital wrote off the value of its stake in Graphcore, a significant setback for the company.
Market Context and Competitors
Graphcore’s once promising position as a potential competitor to Nvidia in the AI space has been overshadowed by Nvidia’s rapid growth. Nvidia briefly held the title of the most valuable company in the world this year. Despite this, Dan Ridsdale, head of technology at Edison Group, sees the acquisition as positive news for UK tech and Graphcore. He believes the industry needs viable competitors to Nvidia and that substantial capital from SoftBank could provide Graphcore with the necessary resources to compete.
Impact on UK Financial Markets
The sale of Graphcore to SoftBank highlights ongoing concerns about the UK’s ability to nurture and retain high-tech firms capable of competing globally. The acquisition of promising UK start-ups by foreign companies can be seen as a loss for the UK tech industry. However, it also reflects the global nature of the tech industry and the need for substantial investment to support growth and innovation.
SoftBank’s Strategy
SoftBank’s acquisition of Graphcore aligns with its strategy of investing in cutting-edge technology companies. The conglomerate has a history of acquiring and investing in companies with strong growth potential. The acquisition of Arm in 2016 was controversial, but it positioned SoftBank as a significant player in the semiconductor industry. The acquisition of Graphcore further strengthens SoftBank’s position in the AI chip market.
Future of AI Chip Development
The AI chip market is expected to grow significantly in the coming years, driven by the increasing demand for AI applications. Companies like Nvidia have already established dominant positions, but there are opportunities for other players to carve out niches and develop competitive products. Graphcore’s collaboration with SoftBank could provide the necessary capital and resources to develop innovative AI chips and compete in the global market.
Conclusion
The acquisition of Graphcore by SoftBank marks a significant development in the AI chip market. While it raises questions about the UK’s ability to retain and grow high-tech firms, it also provides Graphcore with the opportunity for substantial investment and growth. The deal highlights the global nature of the tech industry and the importance of significant capital to support innovation and competition. As Graphcore continues its journey under SoftBank, it will be interesting to see how the company evolves and competes in the rapidly growing AI chip market.
