Arm’s biggest customers are also backing a rival chip design — here’s what you need to know
Dado Ruvic | Reuters
With Arm slated to start trading on the Nasdaq on Thursday, investors are considering the potential upsides — and downsides — of investing in the company.
The British chip designer itself flagged several risks in its IPO prospectus, ranging from its China business to geopolitics, but one potential threat has gained traction as its listing nears.
It’s called RISC-V, pronounced “risk five” — a rival chip design that is backed by some of Arm’s own customers.
While analysts told CNBC it’s not an immediate threat, Arm itself warned that if it gains traction, it could pose a competitive risk.
What is RISC-V?
To understand RISC-V, let’s consider what Arm actually does. Arm designs what’s known as an instruction set architecture (ISA) for chips known as processors or central processing units (CPUs). These chips can be thought of as the brain of an electronic device.
Arm’s ISA is effectively the blueprint for processors that other companies, from Apple to Qualcomm, base their chips on.
Arm charges these companies licensing fees to use its technology to build their own chips. It also gets royalties when these chips are produced and go into end devices. Arm’s designs underpin processors in 99% of the world’s smartphones.
RISC-V, meanwhile, is an entirely different instruction set architecture. RISC stands for reduced instruction set computer.
The main difference is that RISC-V is open-source, meaning it’s free to use.
“If RISC-V-related technology continues to be developed and market support for RISC-V increases, our customers may choose to utilize this free, open-source architecture instead of our products,” Arm said in its IPO prospectus.
Is RISC-V gaining traction?
RISC-V in recent years has gained support from some of the world’s biggest technology companies, many of which are also Arm customers.
Google, Samsung, Qualcomm and Nvidia, for instance, are part of a consortium formed in 2020 to develop RISC-V-based technologies.
Arm warned that if this development is successful, there could be a viable alternative to its architecture.
“Although the development of alternative architectures and technology is a time-intensive process, if our competitors establish cooperative relationships or consolidate with each other or third parties, such as the recently announced joint venture focused on RISC-V, they may have additional resources that would allow them to more quickly develop architectures and other technology that directly compete with our products,” Arm said in its IPO prospectus.
Support for RISC-V was “galvanized” after Nvidia proposed to buy Arm for $40 billion in 2020, according to technology researcher Richard Windsor, founder of Radio Free Mobile.
He suggested that other players were worried that if a major customer like Nvidia controlled Arm, it could be a disadvantage to some of Nvidia’s rivals.
The proposed takeover “raised a lot of hackles in the industry” and some Arm customers are “starting to think twice” about their dependency on the company, Windsor told CNBC this week.
“Maybe we should have a second source just in case things start not going in our direction, or we have problems with Arm,” he added, in reference to the thinking among some Arm customers.
Is RISC-V a threat to Arm?
The general consensus is that, right now, RISC-V doesn’t pose a major threat to Arm. That’s because the technology is currently far inferior to Arm’s offering.
“The issue with RISC-V is it’s much more immature. It doesn’t have the same level of support for more advanced designs,” Peter Richardson, research director at Counterpoint Research, told CNBC.
“RISC-V is quite far away from being at that leading edge, but for some workloads not at the cutting edge, then RISC-V can work quite well.”
One of Arm’s big successes is its huge customer base of major tech players. This has allowed Cambridge, England-based company to build an “ecosystem” of companies that rely on its technology — an advantage that RISC-V doesn’t have.
“Whenever you devise software that runs on one Arm, it will run on all the others as well,” Herman Hauser, founder of Acorn Computers, the company behind the first Arm chip, told CNBC’s “Squawk Box Europe” on Thursday. “So I think Arm will continue to retain its dominant position.”
However, there are fears that Chinese companies in particular could view RISC-V as a cheaper — and more appealing — alternative, particularly if Arm increases its prices.
“If Arm raises its prices, what are chip designers in China going to do? They’re probably going to go for the free version. I wouldn’t be surprised if China really scales up on RISC-V,” Cyrus Mewawalla, head of thematic intelligence at Global Data, told CNBC this week.
Upgrade CEO Renaud Laplanche speaks at a conference in Brooklyn, New York, in 2018.
Alex Flynn | Bloomberg via Getty Images
Upgrade, the online lender started by LendingClub founder Renaud Laplanche, has raised a new round of funding that values the startup at $7.3 billion.
The company said in a press release on Thursday that it raised $165 million in a round led by Neuberger Berman, with participation from LuminArx Capital Management. Laplanche, who created Upgrade in 2016, said it’s the first time the company has raised money since 2021.
“We’ve been cash flow positive over the past three years, so we didn’t have to do a new round,” Laplanche said in an interview.
Upgrade got its start offering relatively small personal loans, operating in a similar market as LendingClub. The company has since expanded deeper into financial services with checking and savings accounts, a credit card, credit health monitoring and a buy now, pay later offering. In 2023, Upgrade acquired BNPL travel company Uplift for $100 million.
Revenue has more than doubled since the company’s last fundraise, Laplanche said, and annualized revenue passed $1 billion in May.
Laplanche, who took LendingClub public in 2014, said Upgrade is looking to IPO but wanted additional capital for its balance sheet in the meantime. He said the company is also establishing a new valuation as it begins to offer employee liquidity.
“We were probably 12 to 18 months away from an IPO at this stage,” he said. “So we wanted to go ahead and make sure everyone could sell a little bit of stock now without having to wait for the IPO.”
Although consumer lending is still dominated by traditional banks like JPMorgan Chase, Laplanche said the majority of Upgrade’s customers are migrating from the legacy banks to take advantage of more automated and faster services.
“This year, we’re focusing mostly on making the customer experience make sense across multiple products and making sure that the customer who might have joined Upgrade through a BNPL product has a very seamless experience,” Laplanche said.
The company has also been focusing on home improvement and auto financing, areas that surpassed $2 billion and $1 billion, respectively, in total loan originations earlier this year.
Competition is rising across the board.
Chime, which offers an array of online banking services, went public in June. SoFi has been gaining popularity. And fintech companies including PayPal and Square parent Block have been adding more banking services to their portfolios.
Within BNPL, there’s Affirm and Klarna, which held its IPO last month.
Laplanche said Upgrade’s focus in BNPL has been in the travel industry, through relationships with airlines, cruise lines, car rental companies and hotels.
“It’s a pretty specific industry that’s different from retail, where Klarna and Affirm are stronger,” he said.
Technology
PayPal’s crypto partner mints a whopping $300 trillion worth of stablecoins in ‘technical error’
A Paypal logo is seen displayed on a smartphone next to cryptocurrency coins.
Sopa Images | Lightrocket | Getty Images
Paxos, the blockchain partner of PayPal, mistakenly minted $300 trillion worth of the online payment giant’s stablecoin on Wednesday in what the company called a “technical error.”
Market watchers had spotted the enormous injection of the PayPal PYUSD stablecoin on Etherscan — a block explorer and analytics platform for the Ethereum blockchain.
Paxos had mistakenly minted the stablecoins as part of an internal transfer, before it “immediately identified the error and burned the excess PYUSD,” the company said in a social media statement.
“This was an internal technical error. There is no security breach. Customer funds are safe. We have addressed the root cause,” it added. PayPal didn’t respond to an inquiry from CNBC outside of regular business hours.
Transactions on Etherscan showed that the mistake had been fixed after about 20 minutes.
PYUSD is advertised as a dollar-pegged stablecoin that is fully backed by U.S. dollar deposits, U.S. treasuries and similar cash equivalents. Therefore, PayPal says the tokens are always redeemable for U.S. dollars on a 1:1 basis.
However, the technical error highlights that the dollar peg is guaranteed by PayPal and its independent third-party attestation reports, rather than intrinsically tied to the minting of a stablecoin.
There aren’t enough dollars in global circulation to back $300 trillion PYUSD, which would theoretically require more than double the world’s estimated total GDP.
Paxos’ error comes at a time when stablecoins are becoming more mainstream as its adopted by an increasing number of banks and payment platforms.
PYUSD is currently the sixth-largest stablecoin in the world with a market capitalization of over $2.6 billion, according to data from CoinMarketCap.
-
Sports3 years ago‘Storybook stuff’: Inside the night Bryce Harper sent the Phillies to the World Series
-
Sports2 years agoStory injured on diving stop, exits Red Sox game
-
Sports2 years agoGame 1 of WS least-watched in recorded history
-
Sports3 years agoButton battles heat exhaustion in NASCAR debut
-
Sports3 years agoMLB Rank 2023: Ranking baseball’s top 100 players
-
Sports4 years ago
Team Europe easily wins 4th straight Laver Cup
-
Environment2 years agoJapan and South Korea have a lot at stake in a free and open South China Sea
-
Environment1 year agoHere are the best electric bikes you can buy at every price level in October 2024