Chipmaker Arm Is Riding AI Wave And Outperforming The Market
British smartphone chip designer Arm Holdings (NASDAQ:ARM) trades above its 50-day moving average of $134.91. The stock surged 20% year-to-date, 39% in the last three months.
The tech-heavy NASDAQ 100 Index (dominated by Nvidia (NASDAQ: NVDA), Microsoft (NASDAQ:MSFT), and Apple (NASDAQ:AAPL)), which includes Arm, gained over 8% and 19% during the periods.
Nearly all smartphones run on processors built using Arm’s architecture. SoftBank Group (OTC:SFTBF) (OTC:SFTBY)- owned Arm creates the core design blueprints and licenses them to companies such as Qualcomm (NASDAQ:QCOM), Samsung (OTC:SSNLF), and Apple (NASDAQ:AAPL), which then develop and manufacture the final chips.
Also Read: Arm CEO Warns Chip Sanctions On China Are Counterproductive For USA
Arm rival Nvidia gained over 19% and 40% during the periods, backed by demand for its Graphics Processing Units (GPUs) and its Compute and Networking segment, which includes AI processors and data center architecture.
What Is Fueling Arm’s Upside?
On May 7, Arm Holdings reported fourth-quarter revenue of $1.24 billion (up from $928 million a year ago), which beat the consensus estimate of $1.23 billion.
This was driven by increased deployment of its CSS platforms across AI data centers, cloud computing, and mobile. The company reported it achieved record licensing revenue and delivered record royalty revenue exceeding $600 million in the fourth quarter.
ARM projects first-quarter revenue of $1 billion to 1.1 billion, representing 12% growth, with royalty growth accelerating to 25-30%.
Rene Haas, CEO, emphasized that the company remains a primary beneficiary of rising AI demand, stating that AI is transforming every industry, and Arm is essential to powering it.
He also projected strong momentum in the data center space, expecting up to 50% of new server chips at hyperscalers to use Arm-based designs this year.
Arm CFO Jason Child explained that the company withheld full-year guidance due to macroeconomic uncertainties, including potential indirect effects from U.S.-China tariffs.
He reassured investors that tariffs don’t directly affect Arm since it provides services—not end products—but noted that 10–20% of royalty revenue tied to U.S. shipments could see minor demand-driven impacts.
What Are The Macroeconomic Growth Frivers For Arm?
Arm stands to gain from several recent developments boosting the U.S. chip industry. President Donald Trump’s newly passed “Big Beautiful Bill” raises the semiconductor investment tax credit from 25% to 30% through 2026, encouraging chipmakers to expand domestic manufacturing, potentially increasing demand for Arm’s chip designs.
In addition, the bill eliminates the $7,500 EV tax credit starting September 30, prompting automakers to hike EV prices. Higher margins could give these companies more room to invest in advanced chips, further supporting Arm’s growth as a leading chip architecture provider.
What Do Experts Think About Arm?
After the quarterly results, analysts slashed their price forecasts on Arm, citing indirect tariff impacts.
On June 11, in CNBC’s “Mad Money Lightning Round,” Jim Cramer backed Arm, saying investors are in good hands with CEO Rene Haas, whom he praised as a strong leader and a key partner of Nvidia.
Thirty analysts have assigned Arm a consensus price forecast of $151.72. Rosenblatt set the highest forecast at $225 on February 6, 2025. Based on the latest ratings from Mizuho, Guggenheim, and Loop Capital, which average $174, Arm could see an implied upside of 16.97%.
On June 9, Bank of America Securities analyst Vivek Arya highlighted Arm’s growing strength in the data center space, noting that the company expects to maintain a 50% share of server CPU deployments this year.
He raised his price forecast on Arm to $150 from $135, citing its expanding market share, robust licensing model, and rising royalty rates—factors that give it a stronger growth profile than rivals like Nvidia, Advanced Micro Devices (NASDAQ:AMD), and Intel (NASDAQ:INTC).
Arya reaffirmed his bullish stance on Nvidia, calling it the best positioned to capitalize on the AI boom due to its unmatched performance lead, massive developer base, and full-scale rack system production.
While AMD shows solid momentum with strong second-quarter sell-through and potential seasonal gains, Intel continues to face concerns around tariff-related PC pull-ins.
Price Action: ARM stock is up by 1.17% at $149.52 at the last check Wednesday.
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