U.K. chip designer Arm is set to go public soon in what will be one of the biggest IPOs ever. In fact, only the IPOs of Meta (NASDAQ:META), formerly Facebook, and Rivian (NASDAQ:RIVN) were larger. SoftBank (OTCMKTS:SFTBY) owns Arm and will retain more than 90% ownership following the IPO. It’s likely to be the biggest winner as Arm goes public.
However, tech firms are also eager with many chip makers already having expressed interest in buying into the IPO. Early estimates suggest that their collective investment could total more than $730 million of the total $4.6 billion expected. In turn, that investment should serve to raise the prices of those firms that invest heavily in Arm.
Taiwan Semiconductor (TSM)
Taiwan Semiconductor (NYSE:TSM) has said it will invest up to $100 million into Arm’s IPO.
The company has a vested interest in Arm’s success, after all. Mr. Liu noted as much in stating that Arm is an important part of his firm and the wider ecosystem of which Taiwan Semiconductor is a vital participant. It simply makes sense then that the company would choose to invest in Arm’s IPO. The greater the success of the IPO, the better funded Arm will be, thus, the stronger Taiwan Semiconductor becomes.
It’s pretty simple overall. Taiwan Semiconductor ought to invest in the Arm IPO because it will strengthen the overall playing field. The aphorism that rising tides lift all ships comes to mind in this case.
Apple (AAPL)
Apple (NASDAQ:AAPL) is among the most visible tech stocks, period. While most investors recognize the firm for iPhones, iPads and MacBooks it is also a chip firm. The chips in early versions of the iPad and iPhone were designed by Apple’s engineers. These days, Apple continues to bring more chip manufacturing and design in-house, especially in relation to Mac products.
Apple is all-in on the Arm IPO per Arm’s F-1 filing. Thus, the question is whether you believe the IPO will boost Apple’s shares. I think so. Apple’s shares have been lagging in recent weeks and cracks have emerged. Investors are again questioning Apple’s waning sales, this time on geopolitical grounds and not macroeconomic concerns. China banned iPhones for central government officials at work.
I’d argue that investors are looking for a reason to be positive about Apple. Share prices have been very strong in 2023 and I bet investors are eager to claw back losses that have occurred since early August.
Nvidia (NVDA)
Nvidia (NASDAQ:NVDA), like Apple, is confirmed to have plans to invest in the IPO of Arm. Arm’s architecture is central to Nvidia’s products and has been named as one of the ten cornerstone investors in the public offering.
The so-called cornerstone investors are all heavily involved in the semiconductor industry. The makeup of the firms indicates how vital Arm is to the overall chip ecosystem and suggests it’s almost too big to see any real issues.
Nvidia’s bid to acquire Arm was announced in 2020 and then thwarted in 2022 after regulators cited significant concerns about monopoly power. Fears that Arm’s architecture would no longer be available to the broader chip sector were a big part of that decision. That indicates how much Nvidia believes in Arm’s architecture at the same time. Nvidia may still be sore that it can’t control that tech all for itself but it will certainly be happy to invest and further it nonetheless. It’s one more reason to invest in Nvidia in what has been an incredible year overall.
On the date of publication, Alex Sirois did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
