SoftBank offers £400 million for AI startup Graphcore, says report

Business news | July 1, 2024

By Peter Clarke

Graphcore Processor AI softbank

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Japan’s SoftBank Group, has offered about £400 million (about US$500 million) for troubled AI startup Graphcore Ltd. (Bristol, England). The deal is being reviewed by the UK government under national security legislation, according to The Telegraph.

The approval from the UK government is the final hurdle before the deal is formally announced, the report said.

However, it values Graphcore at considerably less than the ‘double-unicorn’ status the company achieved at the end of 2020 (see US$222 million funding round values Graphcore at over $2.7 billion).

SoftBank is the majority owner of processor IP licensor ARM Holdings plc (Cambridge, England) and led by CEO Masayoshi Son. The offer for troubled Graphcore was expected (see SoftBank closer to buying Graphcore, say reports).

Similarly, the scrutiny of the deal under the National Security and Investment Act was also expected. Given that UK semiconductor champion ARM is 90 percent already owned by SoftBank and that the alternative to the deal might be the death of Graphcore the deal is unlikely to be blocked. The government could set certain conditions given the importance of AI to defence, security and domestic market development.

Traction failure

Graphcore, founded in 2016, has developed semiconductor chips – intelligence processing units or IPUs – designed to perform machine learning functions in the data center. After successfully raising US$700 million in equity funding it has struggled to take significant market share against competitor Nvidia.

In its financial results for the year to December 31, 2022, Graphcore reported it made a loss before tax of more than US$200 million on annual revenue of US$2.7 million that was down from sales of US$5.0 million in the previous year. The accounts for 2022 also stated that additional funding would be needed in 3Q23. No such fundraising has been announced and discussion of the sale of the business may have resulted from fundraising discussions.

Chrysalis Investments Ltd. (Guernsey, Channel Islands) is an investor in Graphcore and in December 2023 announced a likely disposal of one of its portfolio companies. In interim results published June 28, Chrysalis said that discussions around the “likely disposal” were continuing and that they were “on-track” and that is was hoped they would conclude shortly.