Arm Holdings plc hopes to raise as much as $4.87 billion in its upcoming public offering on the NYSE.

The U.K.-based chip designer confidentiality submitted its IPO filing in April and publicly released the document last month. In an updated version of the paperwork filed today, Arm shared more details about its stock market plans. The company disclosed that it intends to sell 95.5 million shares for $47 to $51 apiece, which means the IPO is set to raise between $4.49 billion and $4.87 billion.

That number could potentially increase. When there’s strong investor demand for an IPO, the company going public sometimes increases its price target. Moreover, Arm’s underwriters have the option to buy 7 million shares worth $735 million on top of the 95.5 million the chip designer has already penciled in.

The current terms of the IPO would value Arm at $52 billion on the high end of its fundraising target. That’s considerably lower than the $70 billion valuation the chip designer’s parent company, SoftBank Group Corp., had reportedly sought as recently as last month. But the sum is still considerably higher than the $32 billion SoftBank paid to buy Arm in 2016.

Arm’s chip designs can be found in millions of devices ranging from data center servers to smartphones and sensors. In its IPO filing, the company estimates that its blueprints were used to make $98.9 billion worth of semiconductors last year. That sum represents 48.9% of the worldwide chip market. 

The cash influx from the IPO could make it easier for Arm to finance new processor development in a time when the associated costs are rising rapidly. According to market research cited in the company’s IPO filing, designing a chip that can be made using a seven-nanometer process costs about $249 million. That price is expected to nearly triple to $725 million for two-nanometer chips. 

Arm reported flat sales growth for its fiscal year ended March 31, disclosing revenues of $2.67 billion in the IPO filing. But the company pointed out that several of the markets where it operates are growing at a brisk pace.

Arm estimates that the market for the main server processors, data processing units and SmartNIC chips used by cloud providers is currently worth $17.9 billion. That number will jump to $28.4 billion in 2025, Arm projects. The market for vehicle chips, in turn, is expected to grow from $18.8 billion to $29.1 billion during the same time frame.

Generative artificial intelligence is emerging as another major driver of chip demand. But though the trend is driving significant revenue growth for some industry players, Arm believes that it also poses potential risks to certain parts of its business. AI models generally run on graphics cards while Arm is best known for designing central processing units. 

The company included a section about AI in the “Risk Factors” section of its IPO filing. “New technologies, such as AI and ML, may use algorithms that are not suitable for a general purpose CPU, such as our processors,” Arm stated. “Consequently, our processors may become less important in a chip based on our products, thus eroding its value to the customer and resulting in lower revenue for us.”

At the same time, the company argued that “as the world moves increasingly towards AI- and ML-enabled computing, Arm will be central to this transition.” Its IPO filing points out that graphics cards are typically used together with central processing units. The company added that it has integrated AI-optimized circuits into several of its CPU designs.

Arm reportedly plans to hold its IPO as early as next week.  

Photo: Arm