British AI chip firm Graphcore, once seen as a potential rival to market leader Nvidia, has been acquired by Japanese conglomerate Softbank.
The acquisition amount has not been disclosed but is believed to be significantly lower than Graphcore’s £2bn valuation from a 2020 financing round.
Nigel Toon, CEO of Graphcore, described the acquisition as “a tremendous endorsement of our team” in an interview with the BBC.
However, the deal raises concerns about the UK’s capability to nurture companies that can compete with major players in the thriving AI chip market.
This isn’t the first time Softbank has acquired a promising UK startup; in 2016, it controversially acquired Arm, another British chip designer.
Technology analyst Ben Barringer from Quilter Cheviot lamented the acquisition, calling it “another bitter blow” to UK financial markets.
He highlighted London’s search for a significant tech listing to bolster its status as a global financial hub.
Science Secretary Peter Kyle welcomed the acquisition as a resolution to uncertainty for Graphcore and its employees but acknowledged it as a reminder of the ongoing efforts needed to enhance the UK’s attractiveness as a hub for starting and scaling businesses.
Mr Toon said he believed the deal showed UK firms could compete with big tech, claiming Graphcore went “toe to toe with the largest companies in this space with a much smaller team with much less capital”.
“It’s really positive for the UK, bringing new investment here to help drive the growth agenda which as we all heard recently is so important.”
Graphcore will become a subsidiary of SoftBank and will continue to be headquartered in Bristol. The company’s CEO will remain in place. New employees will be hired for its UK offices.
Exciting news: Graphcore joins @SoftBank_Group to build next generation of AI compute. https://t.co/DcEMoa1xSh pic.twitter.com/3Q9NcM5vgH
— Graphcore (@graphcoreai) July 11, 2024
Drop in value
While the exact sale price has not been disclosed, reports indicate it is approximately $500 million (£390 million).
Mr. Toon declined to comment on the specific financial details, stating that he would not engage in speculation regarding the sums involved.
However, he acknowledged that valuations of technology firms in general have shown fluctuation recently.
“We’ve certainly seen a lot of other companies, their values have dropped and investors have taken appropriate cautious decisions about how they value investments on their books.
“Hopefully, as a result of this deal, we’ll see big investment and huge progress for Graphcore together with SoftBank.”
Graphcore, established in 2016 by Mr. Toon and Simon Knowles, specializes in advanced computer chips known as the Colossus series, designed for high-performance computing.
However, since its peak valuation in 2020, Graphcore has faced challenges with declining sales. In 2022, it announced the closure of offices in Norway, Japan, and South Korea.
By 2023, major tech investor Sequoia Capital had written off the entire value of its investment in the company, marking a significant setback. Once considered a potential rival to Nvidia in the AI sector, Graphcore has struggled to maintain its competitive stance.
Meanwhile, Nvidia has seen substantial growth in its market value, briefly holding the title of the world’s most valuable company earlier this year.
“I think this is actually good news for UK tech and Graphcore,” said Dan Ridsdale, head of technology at Edison Group.
“Nvidia has carved out a dominant position in Generative AI… but there are other opportunities within AI and the industry will need viable competitors.
“But Graphcore will need substantial capital – it is a positive that Graphcore has found an investor willing to take the risk and provide the capital to put it in the mix.”