Key Takeaways
Several important trends stand out in the AI investment frenzy. One is that Japan’s SoftBank has been among the biggest spenders, rivaling even the largest American Big Tech firms. Another is the continued AI dominance of British companies, which have long been favorites among technology investors.
Together, these two trends point to a massive flow of money between the two island nations, as embodied by SoftBank’s latest acquisition, Graphcore, which it has reportedly purchased for half a billion dollars.
Japanese investment in the UK’s AI sector reflects fundamental truths about the economies of both countries.
On the one hand, Japan is known for its strengths in manufacturing and hardware but doesn’t have the startup culture or software prowess needed to foster cutting-edge AI innovation.
Meanwhile, the UK has a more established entrepreneurial tradition and is home to Europe’s largest AI research cluster in Cambridge. But it has come to rely on foreign investment to scale its most successful ventures, a dependency some observers have been critical of.
In a recent article , former Arm Vice President Noel Hurley expressed his concern that although they have plowed billions of dollars into British AI companies, foreign Big Tech firms may ultimately end up plundering the country’s talent.
“There are very few places in the world where you can find top AI talent,” he observed:
“But if the big non-UK tech companies are taking it all, then what is left for UK firms? […] We must ask ourselves, are we content with playing a supporting role to the existing US tech beasts?”
Hurley argued that the UK needs these talented AI engineers to build the next Arm or DeepMind and that foreign investment in British AI companies may come at the cost of continued homegrown innovation.
Investment in the UK’s AI firms has certainly exploded in recent years. And SoftBank is among the biggest spenders
In the decade since Google acquired DeepMind, price tags for AI startups have exploded.
Back then, $500 million counted as a mega-deal. Today, although neither SoftBank or Graphcore have confirmed the terms of the deal, if the figure being floated around is correct, half a billion dollars is small change for the Japanese bank.
In the last year alone, SoftBank has injected more than $17 billion into British AI companies.
The biggest check came in the form of a deal to buy back the 25% stake in Arm it sold to Vision Fund in 2018.
Valuing the chip manufacturer at $64 billion at the time of its Initial Public Offering (IPO) last year, the Vision deal saw SoftBank reacquire shares in Arm for double the $8 billion it originally sold them to the Emirati investment fund for.
Since the IPO, Arm’s market capitalization has swollen to over $180 billion, further boosting the value of SoftBank’s now 90% stake in the company.
More recently, the Japanese bank led a $1.05 billion funding round in Wayve—a UK-based startup focused on self-driving vehicle technology.
Between its spending on Arm, Wayve and now Graphcore, SoftBank’s investment in UK-based AI companies is approaching $50 billion, and its holdings are worth much more than that based on Arm’s valuation today.
When SoftBank initially announced plans for Arm’s IPO, it looked as if the firm was planning to cash out in its 2016 investment. But CEO Masayoshi Son has since made it clear that he is willing to spend whatever it takes to secure a role in the booming AI hardware space, where Arm is one of the most important players and Graphcore further embellishes SoftBank’s portfolio.
Whether disruptors like Graphcore will ever dethrone Nvidia remains to be seen. But SoftBank isn’t the only one with an eye on the GPU king’s crown. Just this week, AMD coughed up $665 million to buy Finland’s Silo AI, while Apple, Google, Microsoft and Intel all have their own AI chip ventures in the works—many of them drawing from the UK’s research excellence.
Does that mean Hurley’s fears that foreign investment will lead to an exodus of AI talent are justified? Perhaps, but SoftBank hasn’t made any moves to relocate staff from its UK companies. Convincing employees to move to California is one thing, but language and cultural barriers make Japan a harder sell.
In the end, SoftBank’s big spending on British AI developers could provide an important counterweight to the Silicon Valley giants that would otherwise dominate. Rather than being an instance of vampire capitalism, increased ties between the UK and Japan may prove beneficial for both economies.