UK chip designer Arm Holdings has experienced a significant surge in its stock market value in less than a week as investors anticipate a boom in artificial intelligence (AI). The company’s latest financial results, released last Wednesday, revealed strong sales due to growing demand for AI-related technology. Arm’s chips currently power nearly every smartphone worldwide, leading to its success in the market.
Following its acquisition by Japan’s SoftBank in 2016, Arm returned to the stock market in September of last year. Since its earnings announcement last week, Arm’s shares have skyrocketed by more than 98%. This bullish performance is reminiscent of chipmaker Nvidia, whose AI chips have seen soaring demand, resulting in a stock value that has more than tripled within the past year. Nvidia has become one of the most valuable publicly-traded companies globally, with a market valuation of around $1.8 trillion (£1.4 trillion). It is now the fifth US company to join the esteemed Trillion-dollar club, alongside technology giants Apple, Microsoft, Alphabet, and Amazon.
Although Arm’s technology is not directly employed for AI applications, chip makers like Nvidia are choosing Arm’s central processing units (CPUs) to complement their AI-specific chips. Arm’s customer base also includes well-known consumer brands like Apple, and its chips are gaining traction in the automotive industry due to the development of self-driving technology.
Founded in 1990 by a group of chip designers at the University of Cambridge, Arm was acquired by SoftBank for $32 billion in 2016. However, SoftBank’s plan to sell Arm to Nvidia in 2022 was thwarted by regulatory objections worldwide. As an alternative, SoftBank decided to sell shares in Arm on the Nasdaq stock exchange in New York, which has proven to be a profitable move with the recent surge in Arm’s share value.
The significant increase in Arm’s shares not only benefits the company but also provides respite for SoftBank, which has experienced losses due to the declining valuations of some of its investments, including office space firm WeWork. SoftBank still holds approximately a 90% stake in Arm and has witnessed its own shares climb by nearly 30% over the past week.
In conclusion, Arm’s stock market value has almost doubled within a week as a result of the growing demand for AI-related technology. This surge aligns with the exceptional performance of chipmaker Nvidia, highlighting the significant opportunities presented by the AI boom. As Arm continues to design chips that power various devices and attract major players in the industry, such as Apple and chipmakers like Nvidia, its position in the market remains strong. The positive market response to Arm’s financial results is welcome news for SoftBank, which holds a substantial stake in the company and seeks to recover from previous valuation losses.
