From Breakingviews - SoftBank’s Arm IPO set for double stroke of luck
the $1 trillion market capitalisation threshold, before falling back slightly. Some of that glory should rub off on Arm. Nvidia in 2020 moved to buy it off SoftBank for $40 billion, in part because the UK group’s fundamental chip architecture is useful for artificial-intelligence and other applications that require a heavy computing workload. The deal fellof competition regulators, but Son will no doubt emphasise the connection between the two companies when pitching the listing to investors.
Nvidia’s enterprise value is 24 times this year’s revenue, using the average analyst forecast. Apply that to the roughly $3 billion of revenue that Jefferies is pencilling in for Arm this year, and the result is a valuation of more than $70 billion including debt. That’s the top end of what Son’s bankers are hoping to achieve in a share sale, according toStill, the risk for Son and Arm’s would-be investors is that the AI hype proves to be overblown. In any case, Nvidia’s valuation is an anomaly.
, the key industry benchmark, on average trade at 10 times 2023 revenue, implying an Arm enterprise value of $30 billion. Son’s best hope of exceeding that is to argue that the AI gold rush will prove sustainable.
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