Inside UK Chip Designer ARM's Soaring Share Price

Each year the demand for chips grows, and with it the share price

Inside UK chip designer ARM’s soaring share price

Two years to the day after the FTC and financial governing bodies around the world blocked NVIDIA’s acquisition of ARM, the Cambridge based chip manufacturer released an earnings announcement that would see it’s stock jump up by around 100%.

Arm was founded in 1990 as Advanced RISC Machines Ltd and was a joint venture that included a $3 million investment from Apple. ARM has since been bought by Japanese investment company Softbank for $32 billion. Softbank since planned to sell ARM to the tech giant NVIDIA four years later for $40 billion but the sale was unable to be completed due to regulatory pressure. The issue stemmed from concerns about the pressure NVIDIA could put on the market if they had control of ARM’s vast client list.

ARM enjoys a near 100% market share in the ever growing mobile market and is looking to expand by powering the next generation of processors with a marketing focus on the benefits of recent AI innovations.

A lot of buzz has built up over the past few years on emerging AI technologies and ARM is no exception to this, in fact, it is being touted as one of the big AI stocks of the future. Many are quick to point out however, that ARM is a CPU manufacturer not a GPU manufacturer. A company like NVIDIA that makes GPUs would directly benefit from the massive compute power that recent machine learning developments rely on. Independent research group EPOCH says, “GPUs are the dominant computing platform for accelerating machine learning workloads”.

So, is Arm an AI stock? The AI space is dominated by tech giants such as Google, Microsoft and NVIDIA. Immediately one can see how Arm is linked to the growth of the industry as all the big players are licensees of ARM. According to the recent earnings report ARM’s Q3 licensing has risen 18% to $354 million and with a $824million Q3 2024 revenue it seems to be going very well for them. Arm’s website states “Arm delivers performance, scalability and extended configurability to simplify the deployment of AI across all markets​.” This clearly indicates their intentions on capitalising on the many companies clamouring to develop their AI and machine learning capabilities. ARM is continuously aiming to improve the power and efficiency of their CPUs, with a huge market share and many industry giants relying on them, they are in a prime position to benefit from the global dependency on technology. The future seems bright, I only wish I had invested some of my own money in the stock a few weeks ago.