Arm Holdings Explored Alphawave Acquisition to Boost AI Chip Capabilities
SoftBank-held Arm Holdings has recently considered purchasing UK's Alphawave IP Group to expand its strengths in designing artificial intelligence (AI) processors, as reported by Reuters.
Alphawave, an intellectual property chipmaker, reportedly hired investment banks to explore a sale after gaining interest from Arm and other potential buyers.
Even after the initial discussions, Arm finally decided against pursuing a formal bid, two of the sources informed Reuters. The architecture giant of chips was most interested in Alphawave's serializer-deserializer (SerDes) technology, which is crucial for facilitating high-speed data exchange between AI chips.
This capability is necessary for the operation of large-scale AI systems, like chatbots and generative AI models, which depend on enormous arrays of connected chips.
Alphawave Shares Surge Amid Takeover Talks
Following reports of Arm's interest, Alphawave’s shares surged by 21% on Monday, the stock’s biggest one-day gain since September 2021. The company’s market capitalization reached approximately £707 million with a closing share price of 93.5 pence.
As per Reuters, One of the factors that may have complicated the deal is Alphawave's Chinese joint venture, WiseWave, which it runs with Wise Road Capital. The US government last year blacklisted Wise Road for national security reasons. Arm has also come under the scanner for its relationship with China, particularly at the time of its 2023 IPO.
Also read: OpenAI to Secure $40 Billion in Funding to Boost AI Expansion and Restructure
The Increasing Significance of SerDes in AI Chips
Arm, which is controlled 90% by SoftBank, licenses out its semiconductor design to chipmakers but has been looking into making and marketing its own AI chips to increase diversity in revenues and margins. Such a move might place it directly in competition with its customers, such as Qualcomm. While discounting it as long-term ideation, Arm has been poaching talent for possible chipmaking.
Currently, Arm lacks advanced SerDes technology, which plays a pivotal role in the performance of high-end AI chips by converting data formats for faster transmission. In contrast, companies like Broadcom and Marvell have already built significant businesses around this technology, and Bernstein Research estimates the custom chip market could reach $60 billion by 2028.
Nvidia has developed its own SerDes technology and is open to licensing it, seeing proprietary SerDes as a competitive edge in the growing AI market.
