The crystal ball that wasn't

Hi, it’s Mayumi in Tokyo. British chip architect Arm will be a publicly-listed company again after a hiatus of seven years. But first... Thr [View in browser]( [Bloomberg]( Hi, it’s Mayumi in Tokyo. British chip architect Arm will be a publicly-listed company again after a hiatus of seven years. But first... Three things you need to know today: • SoftBank’s Arm [filed for its mega IPO]( • Zoom boosted its [financial outlook]( • YouTube and Universal Music [formed an AI pact]( Son’s miscalculation When SoftBank Group Corp. CEO Masayoshi Son paid $32 billion for Arm in 2016, he said he was buying a crystal ball for the future of tech. The chip design firm would [give him]( a proprietary view into the world’s leading-edge R&D to guide his investments, he said. Seven years later, Son’s Vision Fund segment is working through a cumulative loss of [$6 billion]( after a series of misplaced or mistimed bets in exactly the tech fields that Arm was supposed to illuminate. After an attempt to sell Arm to Nvidia Corp. failed last year, Son is now okay about sharing his crystal ball with the public again. The fortune teller today is just another portfolio piece. What changed in the interim was a technological shift that Son might have been expected to anticipate. This was a man who for years told the public to prepare for an era when machines would overtake human intelligence. But for perhaps the first time in his life, Son underestimated how quickly technology could move. Son bet on ubiquitous small-scale computing — having computers embedded in everyday life — when the world instead became enamored with the prospect of building human-like intelligence in vast data centers. Arm’s architecture is the gold standard on smartphones because of its power efficiency in dealing with random, ad hoc tasks such as a human user might present. But today, the most important processor class are the graphics chips sold by Nvidia and Advanced Micro Devices Inc., designed to churn through AI-training workloads as quickly as possible. What companies want now is simple but hard: leviathan AI models spanning vast data troves, which can only be adequately powered by faster and simultaneous computation from parallel processors working together. This might have been a gradual migration, had it not been for ChatGPT’s explosive debut late last year. Overnight, AI developers became captivated by the possibilities of building expansive simulacra of the brain to create human-seeming intelligence. In the end, one of AI’s most fervent and longtime believers completely missed the surge that would become generative AI. Son’s reasoning in 2016 wasn’t wrong. Arm remains crucial, enabling the majority of modern Apple Inc. devices, powering Amazon.com Inc. data centers and increasingly making inroads in connected cars by the likes of Tesla Inc. Chipmakers from Intel Corp. to Nvidia visit Arm’s Cambridge research center to discuss roadmaps for the future. But the bulk of the ultra-fast computation that supports generative AI occurs elsewhere, and Arm is no longer the central driver of the push into AI. SoftBank bought out the Vision Fund’s stake in Arm at an implied valuation of $64 billion. Compare that to AI investor darling Nvidia’s $1.2 trillion market cap and you quickly get a sense of the gap between the two chip architectures’ importance to AI. I remember when Son announced he was buying Arm — parting with a precious stake in Alibaba to do so — former executives wondered why the billionaire wasn’t buying Nvidia instead. It turns out Son had invested in Nvidia, accumulating a roughly 5% stake that he sold for about $3.6 billion in early 2019. That stake — had he kept it — would be worth almost $60 billion now. —[Mayumi Negishi](mailto:mnegishi11@bloomberg.net) The big story Threads, Meta’s Twitter killer, needs a web version. The app risks losing its early momentum by [taking so long to release a version]( that works on computers. Get fully charged Elon Musk told the Pentagon he spoke directly with [Russian President Vladimir Putin](, according to the New Yorker. UK’s antitrust watchdog cleared Broadcom’s $61 billion VMware takeover, paving the way for [one of the largest ever tech deals](. Analysts keep raising their price targets for Nvidia, [contributing to the stock’s continued surge](. South Korea’s top internet company Naver is [preparing to release a chatbot](. More from Bloomberg Live event: The Bloomberg Technology Summit in London will host top technology leaders, business executives, innovators and entrepreneurs on Oct. 24. 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