In recent times, a British chip company has captured the attention of all of Wall Street: Arm Holdings. The company’s stock jumped by over 50% in one day and completed a jump of 125% since it was issued less than six months ago, reaching a value of about 118 billion dollars. The reason behind this sudden surge in value was due to encouraging reports and positive 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 the hype surrounding AI and the increase was merely speculative?
To understand Arm Holdings and its significance in the chip industry, we must first look at its architecture. According to Sergey Vaschunok, a senior analyst at Oppenheimer Investment House, there are two architectures in the chip world: Intel’s and Arm’s. While Intel’s architecture is used for home computers, Arm’s is used as the basis for everything else. This means that almost every major technology company makes use of Arm’s chip architecture, including Amazon, Google, Meta, Microsoft – and Nvidia itself.
Arm Holdings controls more than 99% of the market in cellular devices and 41% in vehicles. It also has a significant presence in IoT (Internet of Things) with 65% market share. Additionally, its chips are used in data centers that provide large computing power required for AI developments (10%). The fact that most major tech companies use Arm’s chip architecture speaks to its importance in the industry.
In retrospect, it seems that Softbank should be happy about their failed attempt to purchase Nvidia for $40 billion in 2020 because their holding is worth more than $100 billion today. Last week, Arm reported its results and significantly exceeded analysts’ forecasts. It reported an adjusted profit of $0.29 per share in the last quarter compared to analyst expectations of $0.25 per share and revenues of $824 million compared to expectations of $760 million million. For next year’s revenue forecast, analysts expect it to bring in $3.05 billion while Arm expects it to bring in $3.16-3