Key insights
- Arm's new CPU chip and Raymond James' upgrade signal potential upside for the stock. The move into fabless chip design could boost profits and create a new revenue stream, capitalizing on the growing demand for CPUs in AI data centers. This increases competition with Intel and AMD, potentially impacting their market share and future growth.
Arm Holdings unveiled its first in-house CPU chip this week, moving from just licensing designs to actually making chips. This is a big shift in their business model.
Raymond James upgraded the stock to outperform with a $166 price target, about 23% upside from current levels. Their reasoning is that going fabless (designing but not manufacturing) will boost operating profit and add a new revenue stream on top of licensing.
This comes during the AI data center boom where demand for CPUs is surging alongside GPUs. Nvidia talked about this exact trend at GTC last week, calling CPUs the new bottleneck for agentic AI workloads. Bank of America estimates the CPU market could double from $27B to $60B by 2030.
Arm is now competing more directly with Intel and AMD in the data center space. The question is whether the market has priced this in yet. What do you think about Arm's move here?