AI Threat Sparks Software Stock Sell-Off
Written by Emily J. Thompson, Senior Investment Analyst
Updated: 1h ago
0mins
Should l Buy ARM?
Source: Fool
- Rise of AI Tools: Anthropic's Claude Code is predicted to account for 20% of daily commits on GitHub by year-end, up from 4%, highlighting the significance of AI tools in software development and potentially leading to the decline of traditional coding methods.
- Surge in CPU Demand: Arm Holdings' CFO noted that Agentic AI will significantly increase the demand for CPUs, as they play a crucial role in managing tasks for AI agents, with expectations that data center revenue will surpass mobile as the largest revenue source for the company.
- Data Center Revenue Doubles: Arm disclosed during its earnings call that data center royalty revenue more than doubled year-over-year, indicating strong market demand amid the AI boom, which bolsters investor confidence in future growth prospects.
- Enhanced Profit Potential: Although Arm's stock trades at a high price-to-earnings ratio around 100, reflecting an expensive valuation, the rise of Agentic AI and the introduction of new products provide multiple growth levers, suggesting significant upside potential ahead.
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Analyst Views on ARM
Wall Street analysts forecast ARM stock price to rise over the next 12 months. According to Wall Street analysts, the average 1-year price target for ARM is 173.44 USD with a low forecast of 120.00 USD and a high forecast of 215.00 USD. However, analyst price targets are subjective and often lag stock prices, so investors should focus on the objective reasons behind analyst rating changes, which better reflect the company's fundamentals.
20 Analyst Rating
14 Buy
4 Hold
2 Sell
Moderate Buy
Current: 110.880
Low
120.00
Averages
173.44
High
215.00
Current: 110.880
Low
120.00
Averages
173.44
High
215.00
About ARM
Arm Holdings plc is engaged in operating a global computing platform. It architects, develops, and licenses high-performance and energy-efficient Arm compute platforms. The Company’s principal operations and activities are the licensing, marketing, research and development of central processing unit (CPU) design intellectual property (IP), graphics processors, system IP, market optimized platform IP, and associated software, tools and other related services. Its complementary products include GPU and NPU accelerators, interconnect, and others. Its primary product offerings are CPU products that address diverse performance, power, and cost requirements. It offers a family of GPU and NPU products providing efficient computing acceleration and an optimal visual experience across a wide range of devices. Its CPU, GPU, and System IP products integrated into a foundational compute platform optimized for a specific end market.
About the author
Emily J. Thompson
Emily J. Thompson, a Chartered Financial Analyst (CFA) with 12 years in investment research, graduated with honors from the Wharton School. Specializing in industrial and technology stocks, she provides in-depth analysis for Intellectia’s earnings and market brief reports.
Arm Reports 26% Revenue Growth to $1.24 Billion in Q3
- Record Revenue: Arm's Q3 revenue surged 26% year-over-year to $1.24 billion, marking a record quarterly revenue and the fourth consecutive billion-dollar revenue quarter, indicating strong demand in AI and data center markets.
- Significant Royalty Growth: The company reported a 27% year-over-year increase in royalty revenue to $737 million, driven by expansion in target markets such as AI, smartphones, and edge computing, reflecting the growing scale of Arm's ecosystem.
- Rising Operating Expenses: Despite strong revenue performance, Arm's adjusted operating expenses reached $716 million, a 37% increase from the previous year, raising investor concerns and leading to an over 8% drop in stock price during after-hours trading.
- Optimistic Outlook: Arm expects Q4 revenue to range between $1.42 billion and $1.52 billion, with an average analyst expectation of $1.44 billion, demonstrating confidence in future growth, although projected earnings per share are slightly below analyst forecasts.
See More
AI Threat Sparks Software Stock Sell-Off
- Rise of AI Tools: Anthropic's Claude Code is predicted to account for 20% of daily commits on GitHub by year-end, up from 4%, highlighting the significance of AI tools in software development and potentially leading to the decline of traditional coding methods.
- Surge in CPU Demand: Arm Holdings' CFO noted that Agentic AI will significantly increase the demand for CPUs, as they play a crucial role in managing tasks for AI agents, with expectations that data center revenue will surpass mobile as the largest revenue source for the company.
- Data Center Revenue Doubles: Arm disclosed during its earnings call that data center royalty revenue more than doubled year-over-year, indicating strong market demand amid the AI boom, which bolsters investor confidence in future growth prospects.
- Enhanced Profit Potential: Although Arm's stock trades at a high price-to-earnings ratio around 100, reflecting an expensive valuation, the rise of Agentic AI and the introduction of new products provide multiple growth levers, suggesting significant upside potential ahead.
See More
Arm Holdings Stock Rises Following Strong Earnings Report
- Strong Earnings Report: Following its fiscal third-quarter earnings release, Arm Holdings saw its stock rise for the second consecutive day, with a 10.79% increase, reflecting investor enthusiasm over its data center royalty revenue more than doubling, indicating robust market performance.
- Market Trend Rebound: After a period of decline, the tech sector experienced a rebound, with Arm's stock benefiting from the return of a 'risk-on' trade, suggesting renewed investor confidence in high-risk assets.
- Amazon Investment Outlook: Amazon's forecast of approximately $200 billion in capital expenditures for 2026 is expected to drive further demand for Arm-based chips, particularly in the data center sector, enhancing Arm's market prospects.
- Optimistic Future Outlook: With major tech companies planning to spend over $600 billion on capital expenditures this year, Arm is well-positioned to capitalize on significant market opportunities, leveraging its power-efficient chips in both data centers and emerging AI fields.
See More
U.S. Stocks Rise as Dow Jones Gains Over 700 Points
- Dow Jones Performance: The Dow Jones index rose over 700 points on Friday, indicating a strong market rebound that reflects investor optimism about economic recovery, which could further drive consumer spending and investment.
- Strategic Shares Surge: Strategy shares jumped 14.1% to $122.56 on Friday, signaling a positive market outlook for the company and potentially attracting more investor interest in its future growth prospects.
- Overall Market Trend: The overall rise in U.S. stocks suggests a restoration of investor confidence, which may lead to increased capital inflows into the stock market, thereby promoting economic growth and corporate earnings.
- Market Data Source: This market update is provided by Benzinga APIs, highlighting improved market information transparency that aids investors in making more informed decisions.
See More
US Stocks Plunge as Tech Sector Leads Decline
- Tech Sector Decline: Qualcomm's (QCOM) forecast of weaker-than-expected Q2 revenue led to an over 8% drop in its stock, triggering a sell-off across the tech sector, with the Nasdaq 100 index hitting a 2.5-month low, indicating waning investor confidence in technology stocks.
- Weak Labor Market Signals: Challenger's report revealed a staggering 117.8% year-over-year increase in job cuts for January, totaling 108,435, the highest for January since 2009, while initial jobless claims rose by 22,000 to 231,000, highlighting vulnerabilities in the US labor market that could hinder economic recovery.
- Bitcoin Plunge: Bitcoin (^BTCUSD) plummeted over 12% to a 1.25-year low, reflecting deepening negative momentum in the cryptocurrency market, with approximately $2 billion flowing out of Bitcoin ETFs in the past month, signaling a decline in investor confidence.
- Earnings Season Impact: Despite 150 S&P 500 companies set to report earnings this week, market focus on economic data intensifies, with S&P 500 earnings expected to grow by 8.4% in Q4, yet overall market sentiment remains suppressed by recent economic weakness.
See More
Software Sector Faces AI Tool Shock
- Market Panic Intensifies: The release of new AI tools by Anthropic has triggered a sell-off in software-as-a-service and data provider stocks, with the S&P 500 Software & Services Index dropping over 4% on Thursday and down about 20% year-to-date, indicating market concerns over traditional software business models.
- Divergent Views on AI: While Nvidia CEO Jensen Huang and Arm Holdings CEO Rene Haas argue that AI will enhance existing software tools rather than replace them, there remains a split among analysts regarding the long-term impact of AI on the software industry, with some warning that AI could compress profit margins.
- Hedge Fund Shorting Strategy: As of Wednesday, approximately $24 billion in software stocks have been shorted by hedge funds, reflecting a pessimistic outlook on the future of the software sector, although some analysts describe this panic as
See More
Arm Reports 26% Revenue Growth to $1.24 Billion in Q3
- Record Revenue: Arm's Q3 revenue surged 26% year-over-year to $1.24 billion, marking a record quarterly revenue and the fourth consecutive billion-dollar revenue quarter, indicating strong demand in AI and data center markets.
- Significant Royalty Growth: The company reported a 27% year-over-year increase in royalty revenue to $737 million, driven by expansion in target markets such as AI, smartphones, and edge computing, reflecting the growing scale of Arm's ecosystem.
- Rising Operating Expenses: Despite strong revenue performance, Arm's adjusted operating expenses reached $716 million, a 37% increase from the previous year, raising investor concerns and leading to an over 8% drop in stock price during after-hours trading.
- Optimistic Outlook: Arm expects Q4 revenue to range between $1.42 billion and $1.52 billion, with an average analyst expectation of $1.44 billion, demonstrating confidence in future growth, although projected earnings per share are slightly below analyst forecasts.
See More
AI Threat Sparks Software Stock Sell-Off
- Rise of AI Tools: Anthropic's Claude Code is predicted to account for 20% of daily commits on GitHub by year-end, up from 4%, highlighting the significance of AI tools in software development and potentially leading to the decline of traditional coding methods.
- Surge in CPU Demand: Arm Holdings' CFO noted that Agentic AI will significantly increase the demand for CPUs, as they play a crucial role in managing tasks for AI agents, with expectations that data center revenue will surpass mobile as the largest revenue source for the company.
- Data Center Revenue Doubles: Arm disclosed during its earnings call that data center royalty revenue more than doubled year-over-year, indicating strong market demand amid the AI boom, which bolsters investor confidence in future growth prospects.
- Enhanced Profit Potential: Although Arm's stock trades at a high price-to-earnings ratio around 100, reflecting an expensive valuation, the rise of Agentic AI and the introduction of new products provide multiple growth levers, suggesting significant upside potential ahead.
See More
Arm Holdings Stock Rises Following Strong Earnings Report
- Strong Earnings Report: Following its fiscal third-quarter earnings release, Arm Holdings saw its stock rise for the second consecutive day, with a 10.79% increase, reflecting investor enthusiasm over its data center royalty revenue more than doubling, indicating robust market performance.
- Market Trend Rebound: After a period of decline, the tech sector experienced a rebound, with Arm's stock benefiting from the return of a 'risk-on' trade, suggesting renewed investor confidence in high-risk assets.
- Amazon Investment Outlook: Amazon's forecast of approximately $200 billion in capital expenditures for 2026 is expected to drive further demand for Arm-based chips, particularly in the data center sector, enhancing Arm's market prospects.
- Optimistic Future Outlook: With major tech companies planning to spend over $600 billion on capital expenditures this year, Arm is well-positioned to capitalize on significant market opportunities, leveraging its power-efficient chips in both data centers and emerging AI fields.
See More
U.S. Stocks Rise as Dow Jones Gains Over 700 Points
- Dow Jones Performance: The Dow Jones index rose over 700 points on Friday, indicating a strong market rebound that reflects investor optimism about economic recovery, which could further drive consumer spending and investment.
- Strategic Shares Surge: Strategy shares jumped 14.1% to $122.56 on Friday, signaling a positive market outlook for the company and potentially attracting more investor interest in its future growth prospects.
- Overall Market Trend: The overall rise in U.S. stocks suggests a restoration of investor confidence, which may lead to increased capital inflows into the stock market, thereby promoting economic growth and corporate earnings.
- Market Data Source: This market update is provided by Benzinga APIs, highlighting improved market information transparency that aids investors in making more informed decisions.
See More
US Stocks Plunge as Tech Sector Leads Decline
- Tech Sector Decline: Qualcomm's (QCOM) forecast of weaker-than-expected Q2 revenue led to an over 8% drop in its stock, triggering a sell-off across the tech sector, with the Nasdaq 100 index hitting a 2.5-month low, indicating waning investor confidence in technology stocks.
- Weak Labor Market Signals: Challenger's report revealed a staggering 117.8% year-over-year increase in job cuts for January, totaling 108,435, the highest for January since 2009, while initial jobless claims rose by 22,000 to 231,000, highlighting vulnerabilities in the US labor market that could hinder economic recovery.
- Bitcoin Plunge: Bitcoin (^BTCUSD) plummeted over 12% to a 1.25-year low, reflecting deepening negative momentum in the cryptocurrency market, with approximately $2 billion flowing out of Bitcoin ETFs in the past month, signaling a decline in investor confidence.
- Earnings Season Impact: Despite 150 S&P 500 companies set to report earnings this week, market focus on economic data intensifies, with S&P 500 earnings expected to grow by 8.4% in Q4, yet overall market sentiment remains suppressed by recent economic weakness.
See More
Software Sector Faces AI Tool Shock
- Market Panic Intensifies: The release of new AI tools by Anthropic has triggered a sell-off in software-as-a-service and data provider stocks, with the S&P 500 Software & Services Index dropping over 4% on Thursday and down about 20% year-to-date, indicating market concerns over traditional software business models.
- Divergent Views on AI: While Nvidia CEO Jensen Huang and Arm Holdings CEO Rene Haas argue that AI will enhance existing software tools rather than replace them, there remains a split among analysts regarding the long-term impact of AI on the software industry, with some warning that AI could compress profit margins.
- Hedge Fund Shorting Strategy: As of Wednesday, approximately $24 billion in software stocks have been shorted by hedge funds, reflecting a pessimistic outlook on the future of the software sector, although some analysts describe this panic as
See More
