A major UK microchip maker has been bought by a Japanese conglomerate.

British artificial intelligence (AI) chip firm Graphcore – once considered a potential rival to market leader Nvidia – has been bought by a Japanese conglomerate.

SoftBank has not disclosed how much it paid – but it is understood to be well below the £2bn the UK company is worth after a financing round in 2020.

Nigel Toon, head of GraphCore, told the BBC: “It's a great endorsement from our team.

However, the deal is likely to raise questions about the UK's ability to develop firms that can compete with the biggest players in the fast-growing AI chip market.

Ben Barringer, technology analyst at Quilter Cheviot, said it was “another bitter blow” for UK financial markets to see Graphcore follow through.

“It comes at a time when London is looking for a blockbuster tech listing to restore its reputation as a global financial centre,” he said.

Science Secretary Peter Kyle called the deal a “welcome end to the uncertainty” facing Graphcore and its employees.

But he also acknowledged it was a “reminder of the important work that needs to be done” to make the UK “a great place to start and grow a business.”

Mr Toon said he believed the deal showed UK firms could compete with big tech, claiming that Graphcore “could compete with the biggest companies in the space with a smaller team.” with capital”.

“It's really positive for the UK, bringing new investment here to help drive the growth agenda that we've all heard recently is so important.”

He said he would stay on as head of the company, and the move would see Graphcore hire new staff at its UK offices.

The firm will now be a subsidiary under SoftBank but will remain headquartered in Bristol.

Mr Toon said he would “not go into any speculation” about the amount of money.

But he acknowledged that the valuation of tech firms in general has been “up and down.”

“We've certainly seen a lot of other companies, their valuations have fallen and investors have made reasonably careful decisions about how they value the investments on their books.

“Hopefully, as a result of this deal, we will see big investments and big developments for Graphcore together with SoftBank.”

Graphcore was founded in 2016 by Mr. Toon and Simon Knowles – its computer chips, the Colossus series, allow for powerful computer processing.

However it has struggled with declining sales following its bumper 2020 valuation, and announced in 2022 that it had closed offices in Norway, Japan and South Korea.

This was a major disappointment considering that, at one point, Graphcore was seen as a potential competitor to Nvidia in the AI ​​space.

Its potential rival has risen in value significantly and briefly this year won the title of the world's most valuable company.

“I think this is actually good news for UK tech and GraphCore,” said Dan Ridsdale, head of technology at Edison Group.

“Nvidia has a dominant position in generative AI… but there are more opportunities within AI and the industry will need viable competitors.

“But Graphcore will need a lot of capital – it's a positive that Graphcore has found an investor willing to take the risk and provide capital to mix it up.”