Arm Holdings’ soaring stock price and robust growth forecast is being fueled by AI demand and strategic expansions.
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Leading British tech company Arm Holdings saw its stock surge over 30% on Wednesday after the company said it expects profits and sales before earnings for the current quarter to beat market expectations by a large margin.
The company, best known for designing cutting-edge chips, cited growing demand for its artificial intelligence-based (AI) technology. As a key supplier of chip blueprints to semiconductor industry competitors, Arm has become a success story in technology. Its technology is becoming increasingly common in chips used for artificial intelligence applications.
The news saw Arm’s market capitalization jump by $26 billion, hitting a high of $108 before falling back to $93 at publication time. Arm stock has almost doubled in price from the $51 set at its initial public offering in September.
“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,” President and Chief Analyst at TECHnalysis Research Bob O’Donnell said.
The effectiveness of its expansion strategy was also underlined as Arm’s execs revealed a huge surge in demand for its Arm-based central processors working with Nvidia’s chips.
These chips are used in AI-based applications in data centers, and in new laptops and smartphones that run AI chatbots.
Royalties generated from the firm’s Armv9 chip design architecture now account for 15% of overall royalty revenue, up from 10% last quarter. ArmV9 is generating double the royalty rate of its predecessor, Armv8.
Arm’s financials are bucking an otherwise sluggish trend set by Intel, AMD and Texas instruments – all of which have reported weaker results this year.
Arm’s majority owner SoftBank stands to make a sizeable profit through the stock hike and may even recoup its WeWork losses. SoftBank has a lock-up provision that prevents it from selling Arm shares until the middle of March.