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    Arm Holdings (ARM) Is Down 13.3% After Analyst Downgrades And China Chip Advances Question Its AI Edge

    Simply Wall St·12/19/2025 06:23:03
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    • In recent days, Arm Holdings has faced pressure after high-profile analysts at firms including Mizuho Securities and Goldman Sachs downgraded the stock, citing limited leverage to the AI cycle and challenges in its evolving business model.
    • At the same time, China’s progress toward extreme ultraviolet lithography and semiconductor self-sufficiency has raised fresh questions about long-term competitive positioning across Arm’s ecosystem, even as some analysts still emphasize structural growth drivers tied to AI and newer architectures.
    • Next, we’ll examine how these analyst downgrades and competitive concerns from China’s chip ambitions may reshape Arm’s investment narrative.

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    Arm Holdings Investment Narrative Recap

    To own Arm, you generally need to believe its CPU designs and software ecosystem can keep compounding royalties across smartphones, data centers and edge AI, despite rich valuation and execution risk in new product areas. The recent downgrades and China’s reported EUV progress do not alter the core near term catalyst around AI data center traction, but they do sharpen attention on the key risk of customer and geopolitical concentration, especially in China.

    Against that backdrop, William Blair’s reiterated “Outperform” call stands out, highlighting AI demand, v9 royalty uplift and data center share gains as central growth drivers. This view directly contrasts with the more cautious downgrades, underscoring how differently analysts weigh Arm’s ability to monetize newer architectures and expand beyond smartphones into higher value compute subsystems and full chip solutions.

    Yet, while optimism around Arm’s data center upside is compelling, investors should also be aware of how China exposure and alternative architectures like RISC V could...

    Read the full narrative on Arm Holdings (it's free!)

    Arm Holdings’ narrative projects $7.4 billion revenue and $2.3 billion earnings by 2028. This requires 21.5% yearly revenue growth and about a $1.6 billion earnings increase from $699.0 million today.

    Uncover how Arm Holdings' forecasts yield a $167.97 fair value, a 48% upside to its current price.

    Exploring Other Perspectives

    ARM 1-Year Stock Price Chart
    ARM 1-Year Stock Price Chart

    Some of the most optimistic analysts were modeling Arm’s revenue reaching about US$8.6 billion and earnings of roughly US$2.8 billion before this news, which is far more upbeat than consensus. If you weigh that bullish view against rising geopolitical and competitive risks, you can see how reasonable people can disagree sharply and why it may be worth exploring several different scenarios before you decide how Arm fits into your own portfolio.

    Explore 19 other fair value estimates on Arm Holdings - why the stock might be worth 44% less than the current price!

    Build Your Own Arm Holdings Narrative

    Disagree with existing narratives? Create your own in under 3 minutes - extraordinary investment returns rarely come from following the herd.

    • A great starting point for your Arm Holdings research is our analysis highlighting 2 key rewards that could impact your investment decision.
    • Our free Arm Holdings research report provides a comprehensive fundamental analysis summarized in a single visual - the Snowflake - making it easy to evaluate Arm Holdings' overall financial health at a glance.

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    This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.