Does Rival Chip Deal And Investor Repositioning Change The Bull Case For Arm Holdings (ARM)?

• In recent days, Arm Holdings has come under increased pressure after a rival’s acquisition in the chip design space intensified competitive threats and prompted institutional investors to rebalance their positions.
• Despite these competitive concerns, some large investors have been increasing their exposure to Arm, signalling confidence in its AI-focused architectures and potential royalty expansion.
• We will now examine how this heightened competitive pressure following the rival acquisition could influence Arm Holdings' existing investment narrative and assumptions.

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Arm Holdings Investment Narrative Recap

To own Arm today, you need to believe that its AI centric chip architectures and rising royalty profile can justify a premium valuation, even as competition in chip design intensifies. The rival acquisition raises headline risk, but it does not obviously alter Arm’s near term catalyst: continued traction of its Neoverse and v9 based platforms in AI data centers. The biggest immediate risk remains that elevated R&D and expansion efforts fail to translate into sufficiently profitable royalty growth.

The recent collaboration between Astera Labs and Arm Total Design around Neoverse compute subsystems and chiplet based AI infrastructure is particularly relevant here. It underscores how Arm is trying to embed its IP deeper into data center silicon designs at the very moment rivals are consolidating. For investors focused on catalysts, this type of partnership ties directly to the thesis that Arm can expand its share of AI data center workloads and lift effective royalty rates over time.

Yet, against this optimism, rising competition and customer self sufficiency could still become an information risk that investors should be aware of...

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 $164.85 fair value, a 42% upside to its current price.

Exploring Other Perspectives

Some of the most optimistic analysts once projected Arm’s revenue to reach about US$8.6 billion and earnings US$2.8 billion, yet this new competitive shock and the risk of accelerating RISC V adoption highlight how far actual outcomes could drift from those forecasts.

Explore 18 other fair value estimates on Arm Holdings - why the stock might be worth as much as 81% more 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.

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