SoftBank Acquires Graphcore Amidst AI Chip Industry Shakeup

A Japanese corporation Softbank has acquired British artificial intelligence (AI) chip manufacturer Graphcore, which was formerly seen as a possible competitor to industry leader Nvidia.

Softbank has not revealed the amount it paid; however, it is believed to be a significant amount less than the £2 billion the UK company is estimated to be worth following a funding round in 2020.

The agreement will probably make people wonder if the UK can produce businesses strong enough to compete with the largest names in the rapidly expanding AI chip industry. Softbank had already purchased a promising UK startup; in 2016, it controversially purchased Arm, another British chip designer.

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Technology analyst Ben Barringer of Quilter Cheviot described Graphcore’s move as “another bitter blow” to the UK financial markets. “It comes at a time when London is looking for a blockbuster tech listing to reinvigorate its reputation as a global financial centre,” he stated.

A “welcome end to the uncertainty that has faced Graphcore and its employees” was the statement by Science Secretary Peter Kyle regarding the agreement. However, he acknowledged that it served as a “reminder of the important work that needs to be done” to establish the UK as “the best place to start and grow a business.”

Mr. Toon claimed that Graphcore “went toe to toe with the largest companies in this space with a much smaller team and much less capital” and that the acquisition demonstrated that UK companies could compete with big tech. “It’s positive for the UK, bringing new investment here to help drive the growth agenda, which, as we all heard recently is so important.”

He announced that he would continue as CEO and that Graphcore would be adding employees to its UK operations as a result of the change. The company will still have its Bristol headquarters but will now be a subsidiary of SoftBank.

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Despite not being disclosed to the public, reports claim that the transaction price is $500 million (£390 million). Regarding the amounts of money involved, Mr. Toon stated he would not “go into any of the speculations”.

However, he acknowledged that IT company valuations “have been up and down” generally. “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.”We hope this agreement will lead to significant investment and advancement for Graphcore and SoftBank.”

Mr. Toon and Simon Knowles created Graphcore in 2016, a company whose Colossus line of computer chips enables powerful computer processing. However since its spectacular 2020 value, the company has suffered from declining sales, and in 2022 it revealed that it had closed offices in South Korea, Japan, and Norway.

Subsequently, in 2023, prominent tech investor Sequoia Capital said that the value of their investment in the company had been fully written down. That was a huge letdown because Graphcore was once thought to be Nvidia’s rival in the artificial intelligence market.

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Its potential competitor’s worth has increased dramatically, and for a brief while this year, it was the most valuable corporation in the world. “This is good news for Graphcore and UK tech,” stated Dan Ridsdale, Edison Group’s head of technology. 

“Nvidia has established a commanding lead in the generative AI space, but the market will require strong competitors as AI offers more options. But Graphcore will need substantial capital – it is positive that Graphcore has found an investor willing to take the risk and provide the capital to put it in the mix.”