In less than a week, the stock market value of UK chip designer Arm Holdings nearly doubled as investors jumped on the artificial intelligence (AI) boom.
According to financial results reported by ARM, the demand for AI-related technology is boosting its sales. Arm designs chips that power almost every smartphone in the world today.
In 2016, the company was taken private by Japan’s SoftBank, and it returned to the stock market last September.
Following the company’s release last week, Arm’s shares have surged and are currently worth more than 98%.
Arm shares double in three days as investors cheer company’s AI-driven earnings boom https://t.co/naEyKM3SLz
— Jack Mendel ✍️ (@Mendelpol) February 13, 2024
Arm Shares
As trading resumed after the holiday, shares increased in response to Japanese and South Korean stocks, but US equity futures fell ahead of inflation data due Tuesday.
Arm exceeded experts’ projected revenues of $761 million, reporting over $800 million in sales in the third quarter.
The company additionally said it would again surpass the average analyst’s expectation of $778 million by reporting revenue of $850 million to $900 million for its next quarter. The value of the company’s shares has almost doubled since it reported earnings and issued the better-than-experience guidance.
INVESTORS BET BIG ON UK AI CHIP DESIGNER AS SHARES SOAR
In a remarkable turn of events, UK AI chip designer Arm Holdings has emerged as a frontrunner in the semiconductor market, with its stock market value nearly doubling within a span of just a week. The surge in Arm’s shares…
— Raden Mix (@Raden_Mix) February 13, 2024
According to Dennis Dick, a trader at Triple D Trading, what you’re seeing here is a feeding frenzy for anything to do with Al. He continued by saying that Algos are getting involved, retail traders are getting involved, and people are buying options. All that is just snowballing.
Softbank Rides on Arm’s Success
In addition, Softbank, a Japanese multinational, is also riding the wave of success. Softbank, which paid £24.3bn to take Arm private in 2016, retained a 90.6% stake in Arm after re-listing the company in New York. Thanks to investors, Tuesday saw an 11% increase in Softbank’s shares during overnight trading in Asia. Softbank has seen its shares gain about 30% in the past week.
In 2022, the Japanese conglomerate announced its plan to sell Arm to Nvidia. In April 2022, however, SoftBank said it would sell Arm’s shares on the Nasdaq stock exchange in New York instead of moving forward with the purchase after facing objections from regulators worldwide.
SoftBank plans to take Arm public after Nvidia’s $66 billion takeover deal collapseshttps://t.co/fFkrQMzko6 pic.twitter.com/Q8rnbTWXjn
— Mir Mustafa Ali (@Im_AliMustafa) February 8, 2022
Softbank is, as a result, relieved to see a spike as losses have hit it due to declining asset values, including struggling office space firm WeWork.
AI Boom
Strong demand for chips, coupled with expectations that the upcoming AI boom will benefit chip makers, helped Nvidia Corp. rise Monday and briefly surpass the market value of Amazon.com Inc. The artificial intelligence (AI) boom has also helped Nvidia become one of the world’s most valuable publicly traded companies, with a stock market valuation of around $1.8 trillion (£1.4 trillion).
This also makes Nvidia the fifth publicly traded US company to become a member of the prestigious “Trillion-dollar club,” along with technology giants Apple, Microsoft, Alphabet, and Amazon.
Arm’s technology, however, is not directly used for AI work; chip makers like Nvidia are selecting it for central processing units (CPUs) to support their AI-specific chips.
In addition to Nvidia and Taiwan Semiconductor Manufacturing Company (TSMC), well-known consumer brands like Apple are part of Arm’s clientele. Additionally, the automotive industry is experiencing a surge in demand for Arm-designed chips thanks to the development of self-driving technology.
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