One day after Arm Holdings (NASDAQ: ARM) soared on news of the Stargate artificial intelligence (AI) project, shares of the chip design company known for its energy-efficient CPU architecture were pulling back.
The main reason seemed to be that a closely followed semiconductor newsletter cast doubt on Arm’s role in the Stargate project. Additionally, investors were disappointed with earnings results from memory chipmaker SK Hynix, which sent chip stocks down more broadly.
Start Your Mornings Smarter! Wake up with Breakfast news in your inbox every market day. Sign Up For Free »
As of 11:49 a.m. ET, Arm was down 7.7%.
Image source: Getty Images.
Arm stock jumped yesterday on the news about Stargate, a new AI infrastructure project targeting $100 billion to $500 billion in investment, as Softbank CEO Masayoshi Son was one of the three tech chiefs at the announcement, and Softbank, which owns about 90% of Arm, is in charge of financing the project.
Additionally, a post from OpenAI announcing the project said that Arm was one of five “key initial technology partners,” which could bring a windfall to the chip stock.
However, today, the stock was pulling back as investors debated whether the project could be fully funded and its meaning for Arm.
The newsletter Semianalysis also argued that Arm’s mention in the press release was mostly window dressing for Softbank’s benefit, as Arm’s role is limited to its Grace CPU integration as part of Nvidia‘s components.
Investors also seem to believe that Softbank will have to sell some of its stake in Arm in order to fund Stargate, which could pressure the stock lower.
Yesterday’s 16% gain for Arm was likely exaggerated, as there’s still a lot of uncertainty around the Stargate project, and reaching $100 billion-$500 billion in capital expenditures will be challenging.
Even if Arm’s role is limited to part of the Nvidia stack, that could still be significant for such a large project.
At this point, the stock is expensive enough that further gains should have a clear impact on the bottom line. We’ll learn more about Stargate and get an update on the business when Arm reports fiscal third-quarter earnings on Feb. 5.
Revenue is expected to increase 15% to $947.2 million, and analysts see adjusted earnings per share up from $0.29 to $0.34.
Ever feel like you missed the boat in buying the most successful stocks? Then you’ll want to hear this.
On rare occasions, our expert team of analysts issues a “Double Down” stock recommendation for companies that they think are about to pop. If you’re worried you’ve already missed your chance to invest, now is the best time to buy before it’s too late. And the numbers speak for themselves:
Nvidia: if you invested $1,000 when we doubled down in 2009, you’d have $381,355!*
Apple: if you invested $1,000 when we doubled down in 2008, you’d have $42,390!*
Netflix: if you invested $1,000 when we doubled down in 2004, you’d have $514,479!*
Right now, we’re issuing “Double Down” alerts for three incredible companies, and there may not be another chance like this anytime soon.
*Stock Advisor returns as of January 21, 2025
Jeremy Bowman has positions in Arm Holdings and Nvidia. The Motley Fool has positions in and recommends Nvidia. The Motley Fool has a disclosure policy.
—
Blog powered by G6
Disclaimer! A guest author has made this post. G6 has not checked the post. its content and attachments and under no circumstances will G6 be held responsible or liable in any way for any claims, damages, losses, expenses, costs or liabilities whatsoever (including, without limitation, any direct or indirect damages for loss of profits, business interruption or loss of information) resulting or arising directly or indirectly from your use of or inability to use this website or any websites linked to it, or from your reliance on the information and material on this website, even if the G6 has been advised of the possibility of such damages in advance.
For any inquiries, please contact [email protected]
