Both the American Nvidia Corporation and Arm Holdings, the UK-based chip designer, have experienced a remarkable surge in its stock market value in just a short time as investors eagerly anticipate the artificial intelligence (AI) boom. Both company’s recent financial results revealed a significant increase in sales, driven by the growing demand for AI-related technology. With Arm’s chips already powering nearly every smartphone worldwide, it is well-positioned to capitalize on the expanding AI market. No wonder Nvidia tried to acquire ARM from SoftBank only recently, at the time Nvidia wasn’t know for their energy efficiency, only for the raw power of their GPU’s.
In 2016, Arm Holdings was acquired by Japan’s SoftBank and subsequently returned to the stock market in September 2021. Since its earnings announcement last week, Arm’s shares have skyrocketed, witnessing a staggering 98% increase. This surge mirrors the success of chipmaker Nvidia, whose shares have more than tripled in value over the past year due to the soaring demand for AI chips.
The AI boom has not only propelled Nvidia to become one of the most valuable publicly-traded companies globally, with a market valuation of around $1.8 trillion (£1.4 trillion), but it has also secured its position as the fifth US company to join the prestigious “Trillion-dollar club.” Alongside technology giants Apple, Microsoft, Alphabet, and Amazon, Nvidia’s success is a testament to the immense potential of AI.
Although Arm’s technology is not directly utilized for AI work, chipmakers like Nvidia are opting for Arm’s central processing units (CPUs) to complement their AI-specific chips. Arm’s impressive clientele includes renowned consumer brands like Apple, further reinforcing its influence in the industry. Additionally, the demand for Arm-designed chips is surging in the automotive sector, driven by the advancements in self-driving technology.
Founded in 1990 by a group of chip designers in Cambridge, Arm Holdings has come a long way. SoftBank’s acquisition of Arm in 2016 for $32 billion was a significant milestone in its journey. However, plans for a subsequent sale to Nvidia were halted in April 2022 due to regulatory objections worldwide. Instead, SoftBank opted to sell shares in Arm on the Nasdaq stock exchange in New York.
The surge in Arm’s shares is undoubtedly welcome news for SoftBank, especially considering the losses it has incurred from the declining valuations of some of its investments, including the troubled office space firm WeWork. SoftBank, still holding a roughly 90% stake in Arm, has witnessed a remarkable 30% increase in its own shares over the past week.
As the AI market continues to expand, Arm Holdings is poised to benefit from the growing demand for its chip designs. With its strong presence in the smartphone industry and increasing prominence in the automotive sector, Arm’s position in the market is solidified. The company’s recent surge in stock market value demonstrates the confidence and enthusiasm investors have in its ability to ride the AI wave successfully.
