Expected in September, Arm’s potentially $10 billion IPO would be the largest in 2023.

The year’s most significant initial public offering (IPO) centers around Arm Ltd., a lesser-known company despite its integral role in the tech world. Arm, headquartered in Cambridge, UK, specializes in designing key components for the chips powering nearly all smartphones globally. It was acquired for $32 billion by SoftBank (TYO: 9984) in 2016 and delisted from the London Stock Exchange. (Bloomberg)

Now, SoftBank aims to list a minority Arm stake in New York, abandoning a dual listing due to regulatory challenges. Arm’s valuation journey has fluctuated, with SoftBank adjusting plans to retain control and enhance valuation amidst volatile chip markets.

Arm’s IPO is pivotal, however, spotlighting its role in tech and its potential to capitalize on AI trends for growth and valuation. Its strategic importance is immense, with the IPO expected to raise up to $10 billion by September, potentially riding the wave of artificial intelligence (AI) investment fervor to achieve a valuation of $60 billion to $70 billion in the issue.

Arm’s core function involves crafting semiconductor elements and licensing blueprints and code that facilitate chip-software interactions. This generates over $600 million in quarterly revenue, making Arm a UK tech giant., Strategically, Arm aims to diversify from smartphones to target the data center market, vital for AI advancement. Leveraging its expertise in energy-efficient designs for phones, Arm believes its tech is suitable for power-hungry data centers running AI models. Nvidia (NASDAQ: NVDA), a data center AI accelerator leader, integrates Arm’s technology into its products.

Key clients include Amazon (NASDAQ: AMZN), Samsung (KRX: 005930), and Apple (NASDAQ: AAPL), with even rivals considering Arm’s IPO due to its ubiquitous presence. Arm’s technology is used in processors for around 90% of global smartphones.

Arm’s significance lies in its widespread reach with just around 6,000 employees, contributing to over 240 billion chips. It predicts its tech will process 100% of global digital data, becoming an industry standard.

SoftBank’s attempt in 2020 to sell Arm to Nvidia faced opposition due to concerns over the company’s neutrality, leading to the deal’s cancellation.

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