London, United Kingdom – ARM Holdings plc, a dominant force in the smartphone processor market, is poised to expand its presence in the PC market with the rise of AI computing. Partnering with major hyperscalers and GPU providers, ARM is well-positioned to capitalize on the growing demand for v9 chips, AI PCs, and cloud computing chips. Despite its promising growth prospects, concerns about its overvalued stock price have led to a ‘Sell’ rating with a one-year price target of $90 per share, urging investors to exercise caution and wait for a potential dip before considering investment in the company.
In a move to reduce reliance on NVIDIA Corporation and Advanced Micro Devices, major hyperscalers are developing their own chips based on ARM’s architecture for public cloud customers. Google recently introduced Axion processors, built on open architecture, boasting 50% better performance than Intel Corporation’s existing processors. Microsoft is set to launch its ARM-powered Azure Cobalt CPU, while Amazon unveiled its Graviton4 SoC, signaling a shift towards ARM-based CPUs in the cloud infrastructure market.
The adoption of ARM v9 chips is gaining momentum in the smartphone market, with notable devices like Samsung Galaxy S24, Google Pixel 8, and Vivo X100 embracing the new technology. With ARM dominating the consumer smartphone market, its v9 chips offer a significant efficiency boost, reinforcing its stronghold in the industry. Looking ahead, ARM expects to see growth in consumer electronics and automotive markets as v9 chips continue to gain traction.
In the Q4 FY24 results, ARM reported record royalty and license revenue growth, with a strong outlook for FY25 projecting a 17%-27% revenue increase. The company’s continued success is attributed to the adoption of v9-based chips and the expanding market share among hyperscalers. Furthermore, forecasts indicate a potential 30%+ revenue growth driven by ARM v9 adoption, hyperscalers’ product ramp-up, and the emergence of AI PC growth.
While ARM’s potential for growth in AI PC and smartphone markets is promising, concerns about an unsustainable growth rate and high stock-based compensations pose risks to its valuation. Additionally, SoftBank Group Corp.’s majority ownership of ARM’s shares could lead to potential sell-offs, impacting the company’s stock price in the near future. As investors navigate the evolving landscape of semiconductor technology, careful consideration and monitoring of market dynamics are essential to make informed investment decisions.
