Ampere’s IPO Filing Signals More Arm Cash And More Arm Scrutiny

There is a likelihood that we could see both British chip designer Arm Holdings and one of its server-focused startup adherents, Ampere Computing, go public this year, as indicated by recent rumors of the first and news from Ampere itself this morning that it has confidentially filed for an initial public offering.

Questions abound about whether Arm will fare well in the public market again, given concerns aired by Arm and its failed suitor, Nvidia, before regulators squashed their big merger dreams in February. So now we’re left wondering about the implications of the CPU technology licenser and one of its pure-play licensees gaining a large infusion of capital and the extra scrutiny that comes with going public.

As a privately held company, Ampere Computing raised its largest round of financing from investors yet, $300 million, a little more than a year ago, and tellingly, the sole backer for that round was Oracle, who has happily adopted the chip designer’s Arm-based Altra CPUs to become more competitive in the cloud space. In fact, Oracle has put more than $400 million total into Ampere, according to SEC filings, and the startup’s only other disclosed backers have been Arm and private equity firm The Carlyle Group.

We were just talking about how Microsoft Azure’s recent adoption of Ampere Computing’s 80-core “Quicksilver” Altra chips signaled a new Arm server battle between the cloud service provider and Amazon Web Services, who is now three generations into its homegrown Arm-based Graviton chips.

But with Ampere Computing likely going public sometime in the future, the chip designer would not only gain more funding to grow its base of cloud customers and maybe even expand into the enterprise server market, but it would have to do so due to new pressure from Wall Street while showing the kind of double-digit datacenter growth that has mostly kept AMD’s shareholders happy over the past few years.

The interesting twist to this situation is that after using Arm’s “off-the-shelf” Neoverse N1 cores for its Altra and Altra Max chips that came out in 2020 and 2021, respectively, Ampere has opted to design custom cores for the next generations of its processors, starting with the 5nm “Siryn” chip coming out this year, followed by another processor generation due in 2023.

These new processors will be compliant with Arm’s instruction set architecture — we don’t know which version yet, though we suspect v9 — and this means the startup must have paid a good sum of money to get an Arm ISA license, which is more expensive than Arm’s licenses for off-the-shelf cores. But that’s only one part of the costs: Ampere Computing likely has to staff up a lot more too to ensure its cores will provide better performance and efficiency benefits than those in the X86 world as well as Arm’s own designs.

So it’s no wonder that Ampere Computing is preparing for an IPO. The company’s costs have likely gone up by quite a lot over the last few years as it has scaled up processor development from licensed cores to custom cores, and it needs bigger and better ways to raise cash. But if Ampere Computing’s next chips are clear homeruns among cloud builders and hyperscalers — more so than what Azure and others have already indicated with its currently available Altra CPUs — the big bet could pay off well for the startup, its investors and Arm. And we know Arm needs good allies more than ever now as it searches for goodwill on Wall Street.

 

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