An axe severing a Nvidia chip from an Arm chip.
Illustration: Christopher T. Fong/Protocol

What’s next for Arm?

Protocol Enterprise

Hello and welcome to Protocol Enterprise! Today: Arm starts working on Plan B after the Nvidia deal collapses, the Senate considers new rules for AI audits, and can the OpenStack concept work at the edge?

Spin up

As cases linked to the omicron variant of COVID-19 start to decline, IT organizations are looking ahead to the future. Around 70% of companies surveyed by IDC think their business activity will return to early-2020 levels within a year.

Arm’s uncertain future

When Nvidia announced its plan to acquire Arm from SoftBank in September 2020, it seemed doomed right from the start. The deal finally collapsed late Monday, leaving Arm to fend for itself following SoftBank’s plan to take it public. Arm will do so under new management, replacing CEO Simon Segars after nearly nine years, with Rene Haas, who led the company’s IP group.

Throughout the year-and-a-half long attempt to convince regulators that marrying the two businesses was good for the industry, Arm executives repeated the argument that taking the company public would damage Arm’s future.

  • In a blog post last year, Segars wrote that an initial public offering would “… suffocate our ability to invest, expand, move fast and innovate. Combining with Nvidia will give us the scale, resources and agility needed to maximize the opportunities ahead.”
  • Arm and Nvidia made a similar argument in a December regulatory filing with the U.K. Competition and Markets Authority. In the filing, the companies said that as a public company, Arm wouldn’t have the ability to invest in early-stage revenue businesses and would likely cede the CPU market to AMD and Intel.
  • Arm has grown along with the rise of smartphones, but if it doesn’t expand into new markets that trajectory will likely slow.

Arm reversed course Tuesday. During a briefing with reporters, incoming Arm CEO Haas touted the company’s projected fiscal 2021 results and growing profitability as signs Arm would do just fine on its own as a public company.

  • Haas said that Arm’s business was humming along nicely, the result of strategic decisions made four years ago to stop chasing markets that weren’t profitable.
  • The focus on profit gives Arm enough access to cash to fund its innovation efforts and attack new markets, he said.
  • SoftBank disclosed Monday that it expects Arm’s adjusted 2021 profit to rise to $900 million on revenue of $2.5 billion, though it didn’t disclose the adjustments it made to reach that number.

Industry analysts are skeptical that Arm can succeed at pushing into the data center market without the significant capital injection and support that Nvidia would have provided.

  • The data center market is overwhelmingly dominated by x86 chips made by Intel and AMD. Despite a strong commitment to Arm from AWS, an industry-wide move to Arm processors would require a sustained, significant investment.
  • “If they don’t have a cash infusion, they’re going to find it very hard to compete, in particular, in the data center, the big, big money maker,” Creative Strategies CEO and tech analyst Ben Bajarin told Protocol.
  • SemiAnalysis founder Dylan Patel said that the company’s mixed messages, touting its profitability while also needing to raise public money, didn’t square. “Why are you talking about raising capital to fund development if you’re profitable?” Patel said.

Nvidia probably won’t suffer without Arm. Nvidia has thrived in recent years, making inroads into the data center through its acquisition of Mellanox and its development of data center GPUs and AI supercomputer systems.

  • Sure, it would have been good for Nvidia to have more access to Arm’s portfolio of chip designs, and it might have led to deeper collaboration on some chips, or led to otherwise impossible innovation on new designs.
  • But Nvidia will still partner with Arm as an architectural licensee, and continue the work on its Arm-based Grace server chip, among other products.
  • And Nvidia still dominates the video game graphics chip market. According to the January Steam survey, Nvidia enjoys 75% market share compared to rival graphics processor maker AMD with 15%.

The financial penalties for the deal collapsing are significant but not crippling. Nvidia must now pay SoftBank a $1.25 billion breakup fee, on top of the $750 million it has already paid to license Arm tech for 20 years as part of the initial deal.

— Max A. Cherney (email | twitter)

A MESSAGE FROM ENVOY

The concept of flex work isn’t new, but its widespread adoption is. Flex work helps all of us find some semblance of control in the middle of an uncontrollable pandemic. Giving options makes people happier and less stressed. This leads to a greater desire to participate, which helps us build our communities and culture.

Learn more

Regulating “critical” AI

A federal bill reintroduced last week would give the FTC more tech staff and power to enable better oversight over AI that could make discriminatory decisions affecting people’s employment, finances, housing and more.

The Algorithmic Accountability Act of 2022 calls on companies using automated systems for “critical” decisions to conduct algorithmic impact assessments of those technologies. The FTC would be in charge of making rules for how those assessments should be conducted, and the agency has already begun to gear up for that task. Members of the commission’s new AI advisory team have pushed for use of algorithmic impact assessments as a framework for evaluating the effects of AI.

The bill was changed since a previous version was proposed in 2019. A key distinction: The earlier version would have required assessments of “high-risk” systems, while the updated bill requires companies to evaluate the impact of algorithmic tech if it’s used to make “critical decisions.”

Already, industry is pushing back on the new language. Software industry group BSA The Software Alliance said it would work with legislators to “ensure that any new law clearly targets high risk systems and sensibly allocates responsibilities between organizations that develop and deploy them.”

— Kate Kaye (email | twitter)

Moving to the edge

The OpenStack project fell far short of its goals to become a true alternative to AWS, although it has stuck around longer than you’d think inside telco companies around the world. The organization behind that project evolved into the OpenInfra Foundation in 2020, and this week released a new version of its project for edge computing, known as StarlingX.

Like OpenStack, StarlingX primarily lives inside telco companies, according to The New Stack. But the market for edge computing is still evolving quite rapidly, and there’s no clear blueprint for how businesses will manage data at the midpoint between the end user and the data center.

FedEx CIO Rob Carter told viewers during our Changing Role of the CIO event earlier today that edge computing was the single most exciting and interesting thing FedEx is currently piloting as the future of its IT strategy. If more companies start to think that way, there could be life yet for the concept of open-source enterprise infrastructure projects.

— Tom Krazit (email | twitter)

Around the enterprise

Microsoft is thinking about acquiring security software company Mandiant, which, with a market cap of $4.3 billion at the close of trading Tuesday, makes it worth 0.06 Activisions.

D-Wave, which has followed the beat of its own drummer in quantum computing, will go public through a SPAC deal valuing the company at $1.6 billion.

GlobalFoundries topped Wall Street expectations for revenue and profit during the fourth quarter as demand for chips remains insatiable.

Europe will consider a chip-making stimulus bill that could allot $49 billion in new funding as the U.S. considers a slightly larger package of its own.

Thanks for reading — see you tomorrow!

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