Arm sparked a strong rally in the shares of central processor makers on Wednesday. The company made a bold prediction that its new data-center chip would bring in billions of dollars in annual revenue.
Shares of Arm, which is controlled by SoftBank Group, soared 20% to their highest level since November. Rival chipmakers Intel and Advanced Micro Devices (AMD) also saw their shares climb by more than 5% each.
Arm CEO Rene Haas told Reuters in an interview that the company expects this new data-center chip to generate roughly $15 billion in annual revenue within about five years.
This forecast is the latest sign that the growing use of AI technology — which can create apps, write computer code, and finish presentations with little human help — will be a huge boost for CPU makers. Up until now, the AI boom had mostly benefited Nvidia, whose graphics processors are essential for training AI.
Even Nvidia has been adapting to this shift and earlier this month, they unveiled their own CPU chip for AI.
For Arm, this new chip represents a big change. The company has traditionally relied on licensing its designs to other companies, like Nvidia and Qualcomm. It would then collect a royalty fee based on how many units were sold. Now, they are developing their own high-performance chip.
Unlike current chips designed to answer chatbot questions, Arm said its AGI CPU will be able to handle the complex data-crunching needs of “agentic AI.”
Citigroup analysts noted, “Arm has not taken a baby step, say the production of a die or a chiplet for its customers; it has jumped in with both feet, developing the highly performing and energy efficient Arm AGI CPU.” They added that “The industry move to inference and, in particular, agentic AI is showing the need for more CPUs.” Arm stock was last trading at $162.10 in morning trading, putting it on track to add over $29 billion to its market value.
Analysts at Deutsche Bank believe Arm’s ecosystem is “the most pervasive and unique in the CPU processing sector.” They added that the company is strengthening this position by entering the data center CPU market with a fairly broad initial customer base, including Meta and OpenAI.
According to data compiled by LSEG, Arm is currently trading at 63.08 times analysts’ estimates for its earnings over the next 12 months. This compares to AMD’s 26.64 and Intel’s 71.27, showing strong investor confidence in Arm’s future growth.
