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Revolutionizing Tech: How Arm Became the New Hot Stock on Wall Street and Why it Matters

ByEditor

Feb 11, 2024
Analysts Express Concern Despite 50% Stock Jump in Arm

It was a remarkable day on Wall Street last Thursday, as one British chip company made headlines. The company arm holdings experienced a massive surge in its share price, jumping about 50% in just one day and completing a whopping 125% increase since it was issued less than six months ago, reaching a value of approximately 118 billion dollars. The reason for this sudden growth was due to encouraging reports and impressive forecasts for the future, fueled by strong demand from the field of artificial intelligence. So is arm the new hot stock on Wall Street? Or were investors blinded by the hype surrounding AI and the gains were short-lived?

To understand what makes arm so valuable, it’s important to know that there are two types of chip architectures: Intel’s and Arm’s. While Intel’s architecture is used in home computers, Arm’s architecture forms the basis for almost all other products. This means that almost every major technology company relies on Arm’s chip architecture to power their products, including Amazon, Google, Meta (Facebook), Microsoft – and even Nvidia itself. In fact, Nvidia tried to acquire Arm from Softbank in 2020 for $40 billion (compared to $32 billion at the time of Softbank’s purchase), but regulators stepped in and the deal fell through. Today, Softbank owns about 90% of Arm shares and has benefited greatly from this arrangement.

Despite the lack of interest from Nvidia after their failed acquisition attempt, investors have shown great interest in Arm lately. Last week, the company reported its results and exceeded analysts’ expectations once again. In Q4 alone, they reported an adjusted profit of 29 cents per share compared to forecasted profits of 25 cents per share – generating revenues of $824 million compared to expectations of $760 million. For next year’s revenue forecasts are much more optimistic: while analysts expect revenues of $3.05 billion for 2024, arm expects revenue between $3.16-3.205 billion – a significant difference that indicates positive outlook on future earnings potential.

The sharp jump in arm’s share price over the weekend (by around 50% within two days) could be seen as an indication

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