British AI chipmaker Graphcore acquired by Japan’s Softbank

Japanese investment giant Softbank Group has bought UK-based artificial intelligence chipmaker Graphcore for an undisclosed fee.

Bristol-based Graphcore was once seen as a potential rival to chip giant Nvidia, having reached a valuation of more than £2.1bn in 2020, but has struggled to compete with much larger rivals due to a funding shortfall.

Last year it emerged that Graphcore needed more cash to break even and the group was forced to cut its workforce by a fifth while closing operations in Norway, Japan and South Korea.

Co-founder and CEO Nigel Toon said at a press conference Thursday night that the Softbank acquisition would provide Graphcore with the resources it needs to compete globally.

Toon, who will remain as chief executive, said: “What surprised us was the speed at which this took off and the scale involved.

“This is an absolutely massive level of investment. Graphcore, despite being a modestly sized company compared to our competitors, has managed to compete on equal terms and develop world-class technology.”

Softbank still owns a major stake in British chipmaker Arm, which it acquired in a £26bn deal in 2016.

Arm opted to bypass the City to list in the US in September last year, when the company’s share price had risen more than 185 per cent over that period.

Asked about a potential partnership with Arm, Toon said Graphcore would work with partners across Softbank’s portfolio.

In an effort to harness the AI ​​boom, the new Labour government has pledged to establish a new “office of regulatory innovation,” remove planning hurdles to building crucial data centres and provide funding for long-term research.

Dan Ridsdale, chief technology officer at Edison Group, said: “The deal has been in the air for a while, but it’s interesting to see it come to fruition. As for the deal itself, I think it’s good news for UK tech and Graphcore.

‘Nvidia has built a dominant position in generative AI processing with the ecosystem and capital it now has at its disposal; it will be very difficult to displace it for large-scale LLM/GenAI deployments.

‘However, there are other opportunities within AI and the industry will need viable competitors to Nvidia, but Graphcore will need substantial capital to stay in the mix.

“It is positive that Graphcore has found an investor willing to take the risk and provide the capital to bring Graphcore into the package.”

Reflecting on the state of the British tech industry, Toon cited pension funds’ historic unwillingness to invest in fast-growing startups as a barrier to growth.

He said: ‘There is a huge opportunity here, but there are a lot of structural things that still need to be fixed.

‘If we look at where our money comes from, some of it comes from the UK, but most of it comes from other regions.

“That is the reality and that is the aspect that we are going to have to fix in the future.”