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Chipmaker’s move into data-center CPU market raises competitive profile but complicates Arm Holdings deal

In one stroke Monday, Nvidia NVDA 5.62% showed why it is a force to be reckoned with in semiconductors—and why its most ambitious deal to date will be a stretch.

As part of its annual GTC technology conference, Nvidia announced a new central processing chip, or CPU, called Grace, designed for use in data centers. These are different from the graphics processors the company sells for use in both videogames and data centers. As a CPU, Grace would effectively compete for the data-center slots mostly occupied by chips from Intel Corp. and Advanced Micro Devices.

Hence, news of Nvidia’s entry into the data-center CPU market drove the stocks of both Intel and AMD down 4% to 5% Monday, while Nvidia’s own shares rose nearly 6% by the closing bell. Nvidia’s uptick was also helped by the company’s later announcement that revenue for the first fiscal quarter ending May 2 is tracking above the forecast given on its last earnings call in February. That forecast projected total growth of 72%, so the update indicates Nvidia hasn’t been hamstrung by the bruising chip production shortage spanning several other markets across the globe.

By comparison, the Grace CPU won’t be affecting sales for a long while. Nvidia doesn’t even expect to begin shipping the chip until sometime in 2023, and the company said Monday that the high-powered processor would serve only a niche segment of the market. But the prospect still makes Intel and AMD investors nervous—and rightly so. Nvidia’s graphics chips are a major component in state-of-the-art data centers, given their prowess at artificial intelligence applications. That segment now generates nearly $7 billion a year in revenue for the company, compared with just $339 million five years prior. Wall Street has responded by making Nvidia the second-most-valuable company in the chip space globally, with a market value more than 40% above that of the much larger Intel.

But as Nvidia scales up its ambitions, it will run into more resistance than just its longtime competitors. The Grace chip is based on basic designs from Arm Holdings, the British semiconductor-licensing giant Nvidia is acquiring from SoftBank. That deal was already controversial, as Arm licenses chip designs to nearly all of Nvidia’s competitors—and some of its biggest customers as well. Amazon has its own in-house Arm-based processor called Graviton that is powering a growing volume of workloads at its AWS cloud computing business. Mark Lipacis of Jefferies estimates that Graviton now accounts for about 18% of so-called CPU instances at AWS.

Nvidia continues to maintain that it can score the necessary government approvals to close the Arm deal. But using Arm to crack into a potentially major new market in the meantime will no doubt raise more eyebrows—fueling concerns about Nvidia’s ability to maintain Arm’s long-stated position as the “Switzerland of the semiconductor industry.” Nvidia hasn’t gotten where it is by staying out of the fight.

Multinational company is in talks to sponsor $300 Million SPAC on Nasdaq and is considering another SPAC to float EV maker Polestar

One of China’s largest car makers, Zhejiang Geely Holding Group Co., is making plans to tap into the surging market for SPACs.

The multinational company, which owns Geely Automobile Holdings Ltd. GELYY -6.29% , Volvo Car Group and several other electric-vehicle brands, is in talks to sponsor a special-purpose acquisition company that could raise $300 million in a Nasdaq initial public offering, according to people familiar with the matter.

In addition, the Hangzhou-based group is considering taking one of its European electric-vehicle subsidiaries public by merging it with another SPAC and boosting its valuation sharply, to as much as $40 billion, the people said.

SPACs, also known as blank-check companies, raise money by selling stock publicly and listing on exchanges before finding private businesses to merge with. They have surged in popularity and drawn record sums of money from global investors, Many startups also see mergers with SPACs as a faster and easier way to go public.

More of Asia’s tycoons and investment firms have capitalized on the boom in SPACs on U.S. exchanges this year.

Geely, which is controlled by its billionaire chairman and founder Li Shufu, is considering doing the same. The group is discussing creating a SPAC with its Hong Kong-based venture arm, GLY Capital Management, according to people familiar with the matter. Under the plan being discussed, Mr. Li would sit on the new company’s board with two other Geely representatives and one from Volvo, a person familiar with the talks said.

The funds raised by the new company could give Geely a war chest as it ramps up investments in new technology such as electrification and artificial intelligence. The plan is under deliberation internally and may not go ahead, people familiar with the matter said. GLY Capital, meanwhile, is raising a new venture fund that will invest in “companies that seek to redefine the transportation industry,” the firm said last month. Geely and South Korea’s SK Holdings are anchor investors in the fund, which is targeting a year-end close of $300 million.

Separately, Polestar, a Swedish electric-vehicle maker owned by Volvo Cars and Geely, is considering going public in the U.S. through a different SPAC in a transaction that could value the business at as much as $40 billion, the people familiar with the matter said. If achieved, it would be one of the most valuable SPAC mergers.

Polestar has been a stand-alone brand since 2017 and focuses on high-performance electric cars. The company is wrapping up a Series A fundraising round that will value it at $7 billion, the people said.

Polestar, which runs its day-to-day management and governance independent of Geely and Volvo, is aiming for a Series B fundraising that could boost its valuation to $20 billion by the end of June, before merging with a SPAC to go public, the people said.

Geely and Polestar are discussing the pros and cons of Polestar going public through a SPAC, and a final decision hasn’t been made, people familiar with the matter said.

Geely has begun overhauling its strategy in recognition that it has fallen behind in the transition to electric vehicles, now widely viewed as a critical shift for all global auto makers. Its various electric brands have sold poorly in China, while Tesla Inc., BYD Co. and others have taken a commanding lead in the segment. Last month, Geely said it would set up a China-based company called Zeekr Co. to serve the premium electric-vehicle space in which Polestar and Volvo operate.

Meanwhile, the values of U.S.-listed Chinese electric-vehicle companies Li Auto Inc., Nio Inc. and XPeng Inc. have skyrocketed in recent months, giving them valuations far in excess of Geely’s.

Combining with a SPAC can be a fast track to a high valuation. In February, Lucid Motors Inc., a fledgling electric-vehicle maker based in Newark, Calif., agreed to merge with a SPAC in a deal that valued Lucid at $24 billion.

Grab Holdings Inc. said Tuesday that it would go public through a SPAC with near-$40 billion valuation, confirming details reported earlier by The Wall Street Journal.

Polestar vehicles are built in China, and the country’s electric-vehicle market is among the world’s biggest. An October recall of all global Polestar vehicles over faulty components that caused some vehicles to lose power, however, has dented the brand’s reputation.

Despite positive reviews, the company’s main production model, the Polestar 2—which was positioned as a direct competitor to Tesla’s Model 3—has been a commercial flop in China.

It is now priced at the equivalent of about $41,000 before subsidies, and around 400 units have sold since August, according to the website D1EV, which tracks Chinese electric-vehicle sales. Tesla, in contrast, sold 69,280 Shanghai-built Model 3 and Model Y cars in the March quarter alone in China. The Model 3 sells for around $38,000 in the country.

The Polestar 2 has had a better reception in Europe, where it has sold more than 8,700 units since launching in July, according to the website Car Sales Base. Its sales there are still dwarfed by Tesla’s Model 3 sedan, which sold more than 46,000 units in Europe during the same period. U.S. deliveries of the Polestar 2, priced locally at $59,900, began in December.

Deal values Southeast Asian ‘superapp’ operator at close to $40 billion

Grab Holdings Inc. said it would go public by merging with a special-purpose acquisition company, securing a near-$40 billion valuation in a new milestone for the SPAC boom that has swept U.S. financial markets.

The $39.6 billion deal to list Grab, a ride-hailing, food-delivery and digital-wallet group that operates across much of Southeast Asia, is by far the biggest involving a blank-check company and means Grab’s valuation has more than doubled in just 18 months. The merger also comes alongside a $4 billion-plus fundraising, which is the largest-ever share sale by a Southeast Asian company in the U.S.

Singapore-headquartered Grab said Tuesday it would merge with Altimeter Growth Corp. AGC 1.45% , a SPAC sponsored by Altimeter Capital, of Menlo Park, Calif., confirming details reported earlier by The Wall Street Journal.

Washington united in wanting to regulate how social media groups target and collect data on young users

Senior Democratic and Republican members of Congress say they are determined to rein in the ability of large technology companies to target children, setting up a new front in the push to impose stricter regulations on Big Tech.

Members of both the Senate and the House of Representatives have told the Financial Times they want to pass new laws to curb social media companies that offer products aimed at the under-16s, particularly around issues of data and privacy.

With several companies offering versions of their platforms aimed at younger users — and Facebook’s plan to introduce an Instagram for kids — the call for stronger safeguarding now has a growing coalition of bipartisan support on Capitol Hill.

“Kids’ time online has skyrocketed during the pandemic, and the absence of legal safeguards to protect children as they traverse the online ecosystem is more glaring than ever,” said Ed Markey, a Democratic member of the Senate commerce committee. “We should all be able to agree that corporate profits cannot come before kids’ wellbeing.”

Cathy McMorris Rodgers, the most senior Republican on the House of Representatives energy and commerce committee, said: “For far too long, these companies have refused to be forthcoming about the harms their platforms can cause, such as negative impacts on our children’s mental health.” She added: “Right now all options are on the table.” 

At a hearing last month, members of the House energy and commerce committee grilled Mark Zuckerberg, Jack Dorsey and Sundar Pichai, the chief executives of Facebook, Twitter and Google owner Alphabet respectively, subjecting them to a barrage of accusations about how they track children online, expose children to toxic content, are designed to be addictive and ultimately impact children’s mental health. 

There is a particular backlash against tailored applications for children aged under 13, who are banned from Facebook, and only allowed on YouTube with parental consent.

Google’s YouTube video platform has had a children’s version since 2015 which hosts family-friendly content and advertising. Facebook launched Messenger Kids in 2017, and is now working on an Instagram for kids, which — like Messenger Kids — will be “ads-free”, a move to address concerns that children are being commercialised online.

The companies argue that creating these platforms, which offer extra parental controls, better protects children who might otherwise be exposed to harmful content if they lie about their age to use the main platforms. A 2019 report by the UK communications regulator Ofcom found that more than half of under-13s have a social media profile. YouTube says it shuts down tens of thousands of accounts each week that belong to under-13s.

The initiatives have been met with scepticism, with critics suggesting they are driven by profits and not genuine regard for safety. Advocacy groups argue that even if targeted advertising is not shown to younger users, the companies can collect certain data on them under the prospect of future use and get users addicted to the platform earlier.

“It’s not addressing the underage kids on the existing platform; it’s creating new demand and getting loyalty to their platform,” said Josh Golin, executive director of the Campaign for A Commercial Free Childhood. He added that Facebook’s plan for a children’s Instagram was likely to be about competing with its fast-growing rival TikTok, which is highly popular among Generation Z users. 

The platforms have indicated these alternatives would be safe, educational spaces. However, in a letter sent last week to YouTube’s chief executive Susan Wojcicki, the House subcommittee on economic and consumer policy described YouTube Kids as a “wasteland of vapid, consumerist content”. 

Another letter sent to Zuckerberg last week by Democratic lawmakers, including Markey, called on Facebook to “invest in efforts” to lower the number of pre-teen users on its platform rather than build an Instagram for kids.

Jim Steyer, lawyer and chief executive of the non-profit group Common Sense Media, said the companies should be tougher when it came to “age gating” — or age verification — given they already use artificial intelligence for advertisement targeting and content moderation purposes. “They should’ve solved age gating — these are trillion-dollar companies.” 

Facebook said in a statement that it was undertaking “ongoing work” to keep underage users off Instagram.

YouTube said it had made “significant investments in the YouTube Kids app to make it safer and to serve more educational and enriching content”.

There are three broad areas in which politicians are seeking to legislate: children's’ online privacy; the content they can access online; and the research technology companies carry out on them.

On privacy, Markey has for years been pushing for a “Coppa 2.0” — a stronger version of the Children’s Online Privacy Protection Act passed in 1998 — which would ban internet companies from collecting personal and location information from anyone under 13 without parental consent, and from anyone 13 to 15 years old without the user’s consent. A similar bill has been promoted in the House of Representatives by Kathy Castor, a Democratic representative from Florida.

On content, Markey has promoted a Kids Act which would ban certain practices from any website and app designed for or aimed at children. The act, a version of which has also been proposed in the House, would ban “auto-play” and push alerts in an attempt to make the platforms less addictive. It would also ban hugely popular “unboxing videos”, clips of children unwrapping new toys, which critics say are another way of advertising products to children.

The most likely area for legislative action, say experts, is to force companies to hand over more of the data they have on their child users — information which campaigners say the businesses collect but are reluctant to share.

Lori Trahan, a Democratic representative from Massachusetts, said: “We want to understand the types of data that they are collecting on our children. When you are launching an app like Instagram for kids, what kind of data is being collected on our six to 12 year olds?”

While much of this legislation has been proposed before but never reached a vote, campaigners are hopeful that Instagram’s plans will push politicians to take action.

Markey is likely to launch fresh versions of his proposed legislation in the coming weeks, say Democratic aides, while others are working on new proposals. Trahan said she would launch a new bill forcing companies to work with researchers to determine the impact their products are having on children.

It will then be up to Democratic leaders in the House and Senate to decide whether the issue should be put to a vote, with campaigners optimistic that the conditions are right for something to pass.

“On [Capitol] Hill, we have incredible receptivity on the children’s issues,” said Jeff Chester, executive director of Center for Digital Democracy, a Washington-based non-profit group. “It’s less controversial politically . . . and we have many more voices [than we used to].”

US investment bank will create hundreds of jobs in largest UK base outside London

Goldman Sachs is opening its biggest office in the UK outside London, creating hundreds of technology jobs in Birmingham.

The US investment bank’s decision to open a technology centre in the Midlands city is a sign of growing interest among blue-chip employers in cheaper regional cities with a plentiful supply of graduates.

In recent years Birmingham has attracted the domestic headquarters of HSBC, the bank, and a large outpost of Deutsche Bank, employing about 1,000 people, mainly in back office and technology roles.

Goldman will hire software engineers, data analysts and data scientists to work on new ways of delivering financial services at the Birmingham base, which will open by the end of the year.

Marcus, Goldman’s consumer bank, has a UK office in Milton Keynes but the vast majority of the group’s staff are in London.

Richard Gnodde, chief executive of Goldman Sachs International, said: “Establishing a new office in Birmingham will diversify our UK footprint and give us access to a broad and deep talent pool in the local area. We see tremendous opportunity to enhance our UK presence and continue delivering for our global clients.”

More divisions will move to the office over time, with “several hundred” jobs located there, Goldman said.

Despite dire predictions, the UK’s departure from the EU just over a year ago has not led to mass job losses in the financial services sector.

Neil Rami, chief executive of the West Midlands Growth Company, the investment agency that dealt with Goldman, said the region was “successfully recasting typically London-centric banking structures, offering a premium but far more cost-effective base for innovative businesses”.

Birmingham and the towns around it have in recent decades struggled to recover from the decline of their once-mighty manufacturing industry in the face of global competition.

The local council has led a multibillion-pound revamp of the city centre, tearing up its ring road to create public spaces, cycle paths and new office and residential blocks. The high-speed HS2 rail line opening in 2031 will bring it within 50 minutes of central London.

Goldman’s decision comes as the UK has promised to “level up” prosperity across the country. It is moving tens of thousands of civil servants out of the capital.

The West Midlands’ big universities produce 16,000 science, technology and maths graduates annually. While once they would have left for London, high housing costs and the pandemic has made them more inclined to stay in the region.

Rami said the 2022 Commonwealth Games offered more opportunities to attract international investors.

He said there were 122 financial technology companies in the region with a workforce of more than 7,000 people. Birmingham is home to Europe’s largest asset management fintech innovation hub, The Engine Room, run by industry body The Investment Association.

Cities such as Manchester and Leeds have also attracted investments that would once have gone to London in recent years.

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