Arm’s In The AI Inner Circle Now, So Investors Sent The Chip Designer’s Stock Flying

Arm’s In The AI Inner Circle Now, So Investors Sent The Chip Designer’s Stock Flying
Paul Allison, CFA

15 days ago2 mins

Mentioned in story

What’s going on here?

Arm showed off tidy results on Wednesday, but investors were more impressed with the company that the chip designer’s been keeping.

What does this mean?

It takes a village to rear high-tech semiconductors from fledgling sketches to strong, sculpted specimens. Arm takes on the early days, designing the chips and licensing the blueprints, usually for the smartphone industry. That was risky business last year, when rising prices forced even the most tech-curious shoppers to prioritize groceries and rent over snazzy upgrades. And yet, Arm managed to make more profit last quarter than analysts expected, even piquing investors’ interest by suggesting that the smartphone industry is back on the up. The real kicker, though, was Arm’s reminder that AI-focused chipmakers will be using its blueprints, a development that’s predicted to pull revenue 15% above analysts’ expectations to roughly $900 million. Investors more than matched that upgrade, pushing Arm’s stock up over 50%.

Arm stock
Source: Google Finance

Why should I care?

For markets: The more the merrier.

Arm’s piggy bank pings every time a chipmaker produces and sells a licensed design, so there’s no reason to stay exclusive. The chip designer has built up quite the Rolodex of connections in the smartphone sector, but anyone who’s anyone is hanging out in the AI squad these days. Well, Arm clearly has the gift of the gab, successfully buddying up to “it” firms like Nvidia and Microsoft.

Arm forecast

The bigger picture: Chips, hold the dip.

So far, Nvidia has hogged most of the business in the AI space. But with more major companies rolling out high-tech initiatives, and smaller startups looking to take them on, there could be more than enough of a bounty to share among a few capable chip designers and producers. At the same time, if recessions stay at bay, shoppers will be more likely to splash out on gizmos and gadgets. This year, then, could be one to remember for the chip industry.

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