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ARM Dreams of AI

ARM is coming back to the public markets after years of being owned by Softbank and a failed attempt by NVIDIA to buy them. The deal is structured to work but the current price reflects a too-rosy future.

Will doing be bigger than learning?

The bankers have been busy from their vacation homes getting some big IPO transactions ready for marketing. We're starting with ARM $ARM but we've got Instacart $CART, and Klavyio $KLVO on deck.

These deals will be sized and priced to "work" similar to what was done with The Mobileye $MBLY IPO late last year. In the case of $CART, the deal is small and already over 60% pre-bought! The deal is "priced to go" setting the stage for insiders to get higher prices post-IPO.

ARM will price this evening and trade tomorrow. Investors are eager to own some shares of "the most important IP company in the world" according to some. ARM was already public for many years before Softbank bought it for $32B in 2016.

Management is also keen to ride the "AI hype wave" surrounding semiconductors and computing right now. One school of thought is that we're investing heavily in training these systems now but the bigger payoff will be in the deployment where the low-power chips from ARM could experience a surge in demand.

The proposed IPO price of $47 to $51 is pricing in a lot of success but demand for the deal will exceed supply at the IPO and at least until the lock-up expires.

UPDATE: Priced at the upper end of $51/share. Should open higher.

See below for more on positioning, competition, and valuation.

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