Arm Stock Surges 30% as AI Chip Demand Ignites

Arm Holdings’ soaring stock price and robust growth forecast is being fueled by AI demand and strategic expansions.

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.

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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.

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