Arm, the leading tech company in the United Kingdom, experienced a significant surge in its stock on February 7th. The company announced that it expected its profits and sales before earnings for the current quarter to surpass market expectations by a large margin. This news resulted in a 30% increase in Arm’s stock price. Arm is renowned for its cutting-edge chip designs and has seen a growing demand for its artificial intelligence (AI)-based technology. As a major supplier of chip blueprints to competitors in the semiconductor industry, Arm has become a success story in the world of technology. Its technology is increasingly being used in chips designed for AI applications.
The announcement of Arm’s positive financial outlook caused its market capitalization to rise by $26 billion. At its peak, the stock price reached $108, although it later fell to $93. Since its initial public offering in September 2023, Arm’s stock price has nearly doubled from $51.
Bob O’Donnell, the president and chief analyst at TECHnalysis Research, expressed his confidence in Arm’s forecast and believes it is a positive sign for the rest of the tech industry.
Arm’s expansion strategy has proven to be effective, as evidenced by the surge in demand for its Arm-based central processors, which work in conjunction with Nvidia’s chips. These chips are utilized in AI-based applications in data centers, as well as in new laptops and smartphones equipped with AI chatbots.
The royalties generated from Arm’s Armv9 chip design architecture now account for 15% of its overall royalty revenue, a significant increase from the previous quarter’s 10%. Armv9 is generating twice the royalty rate compared to its predecessor, Armv8.
While other tech companies like Intel, AMD, and Texas Instruments have reported weaker results in 2024, Arm’s financials are bucking the trend.
SoftBank, Arm’s majority owner, stands to make a substantial profit from the surge in stock prices and may even offset its losses from WeWork. However, SoftBank is currently subject to a lock-up provision that prevents it from selling Arm shares until mid-March.
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