AI chip deals low as chip makers become major buyers

22nd February 2024

Omdia

Kristian McCann

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According to the latest findings from Omdia's AI Processors Mergers & Acquisitions Tracker, despite a burgeoning demand for AI chips, the number of deals involving AI chip companies remains modest.

The report, which tracks mergers and acquisitions activity among a key group of technology firms engaged in AI infrastructure and silicon worldwide, indicates that chip manufacturers are emerging as the principal purchasers in this space.

This semi-annual tracker, now in its second edition, began monitoring activity from the first quarter of 2021. Omdia's in-depth analysis reveals a decrease in activity levels compared to the surge witnessed in 2021, with a notable transition from hyperscale companies to semiconductor firms leading the acquisitions. In contrast to the 17 acquisitions involving a hyperscaler in 2021, only a single acquisition was recorded in the first quarter of 2023. Despite this shift, the most frequent type of deal remains one where a hyperscaler acquires a software applications company. Moreover, the market is gradually becoming more international, with a slight increase in transactions involving companies based entirely outside the US.

Alexander Harrowell, Omdia's Principal Analyst for Advanced Computing, commented: "IBM has emerged as the most prolific buyer, maintaining a consistent pace of approximately one acquisition per quarter. This edition highlights a shift in IBM's acquisition strategy from focusing on services and consulting firms to software companies. Conversely, Microsoft, previously a leading acquirer, has ceased its acquisition activities in 2023. Apple, after a period of inactivity since the first quarter of 2022, has re-entered the market with three acquisitions in 2023."

The report also touches on the AI hardware startup landscape, noting that despite the challenges in gaining market share against leading players like NVIDIA, few exits have been observed among startups that received funding during the investment boom of 2018-2019. These startups, buoyed by significant venture capital funding in 2021, still possess considerable resources. However, the industry may witness a domino effect of exits once the first company decides to sell.