Key Insights:

• SoftBank acquires Graphcore, once valued at £2 billion, signaling challenges for UK tech growth.
• Graphcore’s headquarters remain in Bristol, and new investments are expected under SoftBank ownership.
• Graphcore founder Nigel Toon stays on and is optimistic about new growth opportunities in the AI market.

British artificial intelligence (AI) chip firm Graphcore, once considered a potential rival to market leader Nvidia, has been acquired by Japanese conglomerate SoftBank. The financial details of the transaction have not been disclosed. Still, the purchase price is believed to be significantly lower than the £2 billion valuation Graphcore achieved during a financing round in 2020. Graphcore’s head, Nigel Toon, described the acquisition as “a tremendous endorsement of our team.”

Concerns About UK’s Tech Market Competitiveness

The acquisition of Graphcore by SoftBank raises questions about the UK’s ability to develop companies capable of competing with the largest players in the rapidly growing AI chip market. This is not the first time SoftBank has acquired a promising UK start-up; in 2016 it controversially purchased British chip designer Arm. 

Technology analyst Ben Barringer from Quilter Cheviot described the sale as “another bitter blow” to UK financial markets, noting that London is seeking a significant tech listing to bolster its reputation as a global financial center.

Science Secretary Peter Kyle acknowledged the deal as a “welcome end to the uncertainty that has faced Graphcore and its employees” but also recognized it as a “reminder of the important work that needs to be done” to make the UK “the best place to start and grow a business.” Despite the acquisition, Nigel Toon emphasized that UK firms could still compete with major tech companies, stating that Graphcore had gone “toe to toe with the largest companies in this space with a much smaller team with much less capital.”

Future Prospects and Investment

Following the acquisition, Toon will remain as head of Graphcore, which will now operate as a subsidiary of SoftBank while maintaining its headquarters in Bristol. Toon expressed optimism about the future, indicating that the deal would lead to new investments and growth opportunities for Graphcore. 

“It’s positive for the UK, bringing new investment here to help drive the growth agenda, which, as we all heard recently, is so important,” he stated.

While the sale price has not been officially confirmed, reports suggest it is around $500 million (£390 million). Toon did not comment on the speculation regarding the sums involved but acknowledged the fluctuating valuations in the tech sector. 

“We’ve certainly seen a lot of other companies; their values have dropped, and investors have made appropriate, cautious decisions about how they value investments in their books,” he remarked. Toon hoped the deal would result in substantial investment and progress for Graphcore in collaboration with SoftBank.

Graphcore’s Journey and Challenges

Graphcore was founded in 2016 by Nigel Toon and Simon Knowles. The company’s Colossus computer chips allow for powerful computer processing, positioning Graphcore as a significant player in the AI industry. However, the company has faced challenges, including slowing sales since its peak valuation in 2020. In 2022, Graphcore announced the closure of its offices in Norway, Japan, and South Korea. In 2023, major tech investor Sequoia Capital wrote off the value of its stake in the company, marking a substantial setback for Graphcore, which had once been viewed as a potential competitor to Nvidia.

Despite these challenges, some industry experts see the acquisition as a positive development. Dan Ridsdale, head of technology at Edison Group, stated, “I think this is good news for UK tech and Graphcore.” He acknowledged Nvidia’s dominant position in Generative AI but pointed out that other opportunities within AI exist. “Graphcore will need substantial capital – it is positive that Graphcore has found an investor willing to take the risk and provide the capital to put it in the mix,” Ridsdale added.

Graphcore’s acquisition by SoftBank marks a significant moment for the UK tech industry, reflecting the challenges and opportunities British AI firms face. 

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