Arm Holdings’ rising stock price and strong growth forecast are being driven by AI demand and strategic expansions.
Arm Holdings, a leading British technology company, saw its stock rise more than 30% on Wednesday after announcing that it expects profits and sales before earnings for the current quarter to exceed market expectations by a significant margin.
The company, best known for developing cutting-edge chips, cited increased demand for its artificial intelligence (AI) technology. As a key supplier of chip blueprints to competitors in the semiconductor industry, Arm has become a technology success. Its technology is becoming more common in chips used in artificial intelligence applications.
The news caused Arm’s market capitalization to rise by $26 billion, reaching a high of $108 before falling back to $93 at publication time. The price of Arm stock has nearly doubled since its initial public offering in September, which was $51.
“This is a very solid forecast from them, and I think it’s probably a pretty good sign for the rest of the tech industry as a result,” TECHnalysis Research President and Chief Analyst Bob O’Donnell said.
Arm executives revealed a significant increase in demand for its Arm-based central processors that work with Nvidia chips, highlighting the effectiveness of its expansion strategy.
These chips are used in data centers for AI-based applications, as well as in new laptops and smartphones with AI chatbots.
Royalties generated by the firm’s Armv9 chip design architecture now account for 15% of total royalty revenue, up from 10% the previous quarter. ArmV9 generates double the royalty rate as its predecessor, Armv8.
Arm’s financials defy an otherwise sluggish trend set by Intel, AMD, and Texas Instruments, all of which reported lower results this year.
SoftBank, Arm’s majority owner, stands to make a significant profit from the stock increase and may even recoup its WeWork losses. SoftBank’s lock-up provision prevents it from selling Arm shares until the middle of March.