Arm Holdings Surges Amidst AI Investment Frenzy

The market value of UK chip designer Arm Holdings has nearly doubled in less than seven days, as investors anticipate significant growth in the artificial intelligence (AI) sector. The Cambridge-headquartered company released its financial results last Wednesday, revealing a surge in demand for AI-related technology, which has propelled its sales upward.

Arm, a key player in the semiconductor industry, is renowned for designing chips that power the majority of smartphones worldwide. After being taken private by Japan’s SoftBank in 2016, the company returned to the stock market in September last year. Since the announcement of its latest earnings, Arm’s shares have skyrocketed by over 98%.

This surge mirrors the extraordinary performance of chipmaker Nvidia, whose shares have more than tripled in value over the past year due to the soaring demand for its AI chips. Nvidia’s ascent has positioned it among the most valuable publicly traded companies globally, with a market valuation of approximately $1.8 trillion. It joins the elite “trillion-dollar club” alongside tech giants like Apple, Microsoft, Alphabet, and Amazon.

Although Arm’s technology isn’t directly involved in AI operations, chip manufacturers like Nvidia are increasingly adopting Arm’s central processing units (CPUs) to complement their AI-specific chips. Arm’s clientele extends beyond Nvidia and includes prominent consumer brands like Apple, with growing demand for its chips in the automotive sector, particularly for self-driving technology.

Founded in 1990 by a group of chip designers in Cambridge, Arm was acquired by SoftBank in 2016 for $32 billion. However, SoftBank’s plan to sell Arm to Nvidia faced regulatory hurdles, leading the conglomerate to shelve the deal in April 2022. Instead, SoftBank opted to list shares of Arm on the Nasdaq stock exchange in New York.

The recent surge in Arm’s shares offers a reprieve for SoftBank, which has endured losses from declining valuations in its investments, including troubled office space firm WeWork. With SoftBank still holding a significant stake of approximately 90% in Arm, the company’s resurgence contributes to the conglomerate’s recent gains, with its own shares climbing by almost 30% in the past week.