British Chip Company, Arm Holdings, Surges on Wall Street as AI Demand Boosts Its Value

Analysts Express Concern Despite 50% Stock Jump in Arm

Last week, a British chip company made headlines on Wall Street: Arm Holdings. The company’s stock jumped about 50% in just one day and has increased by 125% since it was first issued six months ago, to a value of approximately 118 billion dollars. The recent increase was due to encouraging reports and strong forecasts for the future, driven by 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 short-lived?

To understand the significance of Arm Holdings, we need to know more about this chip company. According to Sergey Vaschunok, a senior analyst at Oppenheimer investment house, there are two architectures in the chip world: Intel and Arm. Intel is used as the basis for most home computers, while Arm is used as the foundation for everything else. Most companies pay royalties to Arm because it holds a patent on its architecture. 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 it controls more than 99% of the market), vehicles (41%), IoT (Internet of Things such as smart homes), and data centers (10%). Many major technology companies use Arm’s chip architecture, including Amazon, Google, Meta (Facebook), Microsoft – and even Nvidia itself. This is why Nvidia tried to purchase Arm from Softbank for $40 billion in 2020 but was stopped by British and American regulators. Today, Softbank should be happy that their holding is worth more than $100 billion after an incredible increase in value over time.

In Q3 2023, ARM Holdings reported its results and exceeded analysts’ forecasts significantly. It reported an adjusted profit of 29 cents per share compared to expected 25 cents per share and revenues of $824 million compared to expectations of $760 million. For next year’s revenue projections, ARM expects $3.16-$3.205 billion while analysts expect $3

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