• Tue. Mar 5th, 2024

From Chipset to Stock Market Sensation: The Rise of Arm Holdings and the Impact of Artificial Intelligence


Feb 11, 2024
Analysts Express Concern Despite 50% Stock Jump in Arm

On Thursday, a British chip company captured the attention of Wall Street: Arm Holdings. In one day, its share price jumped by about 50%, and since its launch less than six months ago, it has increased by 125% to a value of approximately 118 billion dollars. The recent surge in stock was due to positive reports and forecasts for the future thanks to strong demand from the field of artificial intelligence (AI). So is Arm Holdings the new hot stock on Wall Street, or were investors blinded by AI and the increase was spotty?

Let’s first understand what Arm Holdings is. According to Sergey Vaschunok, a senior analyst at Oppenheimer Investment House, there are two architectures in the chip world: Intel’s and Arm’s. Intel provides the architecture for home computers, while Arm serves as the foundation for everything else. Arm holds patents on its architecture, which means that almost all companies pay royalties to it. Softbank, a Japanese investment fund that owns about 90% of Arm shares, benefits from this arrangement.

Arm’s chips are used in various fields such as cellular (where they control over 99% of the market), vehicles (41% of the market), IoT (where they control 65% of the market), and data centers (10%). Many major technology companies make use of ARM’s chip architecture, including Amazon, Google, Meta, Microsoft – and Nvidia itself. In fact, Nvidia tried to purchase ARM from Softbank for 40 billion dollars in 2020 but was blocked by British and American regulators. Today ARM is worth over 100 billion dollars.

Last week ARM reported its results and exceeded analysts’ expectations with an adjusted profit of $0.29 per share in Q4 compared to $0.25 forecasted and revenues of $824 million compared to expectations of $760 million. Looking forward to next year, ARM expects revenue between $3.16-3.2 billion compared to analyst estimates of $3

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