Nvidia Sells ARM Stake, Market Reacts Positively
Written by Emily J. Thompson, Senior Investment Analyst
Updated: 1 hour ago
0mins
Should l Buy ARM?
Source: CNBC
- Nvidia Reduces ARM Stake: Nvidia gradually reduced its stake in ARM by the end of 2024, holding 1.1 million shares valued at $155.8 million; despite the sell-off, Nvidia's 20-year licensing agreement with ARM remains intact, indicating a long-term partnership.
- ARM Earnings Beat Expectations: ARM reported a 26% year-on-year increase in sales to $1.24 billion in its latest earnings report, surpassing analyst expectations and demonstrating strong momentum in AI projects, although its stock fell in after-hours trading, reflecting cautious market sentiment regarding future guidance.
- Positive Market Reaction: Following its Nasdaq debut, ARM's market cap is approximately $135 billion, and Nvidia's stake reduction did not dampen market confidence, as ARM shares rose 1.4% in premarket trading, indicating investor recognition of its long-term growth potential.
- Morgan Stanley Optimistic: Morgan Stanley has an “overweight” rating on ARM with a price target of $135, representing a premium of over 6% from Tuesday's closing price, reflecting a positive outlook on ARM's future performance, particularly in ongoing investments in AI.
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Analyst Views on ARM
Wall Street analysts forecast ARM stock price to rise
24 Analyst Rating
19 Buy
4 Hold
1 Sell
Strong Buy
Current: 125.280
Low
120.00
Averages
160.58
High
201.00
Current: 125.280
Low
120.00
Averages
160.58
High
201.00
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 Holdings Poised for Strong Recovery Amid AI Market Challenges
- AI Market Volatility: Recently, AI stocks like Microsoft have dropped over 20%, reflecting a broader skepticism about the returns on investments made by large tech companies in AI, which has shaken investor confidence.
- Unique Business Model: Unlike Intel and Nvidia, Arm generates most of its revenue from licensing fees and royalties, with over half of its revenue coming from royalties recently, setting a solid foundation for future income growth.
- Deepening Client Relationships: Companies like Amazon, Google, and Apple are increasingly relying on Arm's designs, particularly with Amazon's Graviton 5 processor, which is expected to significantly boost Arm's royalty revenue in the coming years.
- Future Growth Expectations: While analysts project only a 7% revenue growth for fiscal 2026, they anticipate a more than 23% revenue increase in the following year, indicating Arm's potential for recovery in the AI market.
See More
Nvidia Sells Arm Stake but Maintains Partnership
- Nvidia's Stake Sale: Nvidia's SEC filing on Tuesday revealed it has offloaded its stake in semiconductor firm Arm, yet this does not signify the end of their relationship, as Arm's shares rose 1.4% in premarket trading on Wednesday.
- Shareholding History: By the end of Q3, Nvidia held 1.1 million shares of Arm valued at $155.8 million, having maintained its stake since 2023 while gradually winding it down towards the end of 2024, indicating a strategic shift in its investment approach.
- Market Reaction: When Arm debuted on Nasdaq in 2023, Nvidia was part of a strategic investment group that collectively purchased $735 million in shares, and although its $40 billion acquisition bid failed due to regulatory hurdles, Nvidia retains a 20-year licensing agreement with Arm, continuing to support its technology.
- Financial Performance: Arm's recent earnings report showed a 26% year-on-year sales increase to $1.24 billion, exceeding analyst expectations, although shares fell in after-hours trading, with analysts noting high operating expenses suggest the company is preparing for long-term demand.
See More
Nvidia Sells ARM Stake, Market Reacts Positively
- Nvidia Reduces ARM Stake: Nvidia gradually reduced its stake in ARM by the end of 2024, holding 1.1 million shares valued at $155.8 million; despite the sell-off, Nvidia's 20-year licensing agreement with ARM remains intact, indicating a long-term partnership.
- ARM Earnings Beat Expectations: ARM reported a 26% year-on-year increase in sales to $1.24 billion in its latest earnings report, surpassing analyst expectations and demonstrating strong momentum in AI projects, although its stock fell in after-hours trading, reflecting cautious market sentiment regarding future guidance.
- Positive Market Reaction: Following its Nasdaq debut, ARM's market cap is approximately $135 billion, and Nvidia's stake reduction did not dampen market confidence, as ARM shares rose 1.4% in premarket trading, indicating investor recognition of its long-term growth potential.
- Morgan Stanley Optimistic: Morgan Stanley has an “overweight” rating on ARM with a price target of $135, representing a premium of over 6% from Tuesday's closing price, reflecting a positive outlook on ARM's future performance, particularly in ongoing investments in AI.
See More
Applied Digital and Recursion Pharmaceuticals Shares Decline, Attributed to Nvidia.
- Stock Performance: Applied Digital, Recursion Pharmaceuticals, and WeRide stocks experienced a decline early on Wednesday.
- Nvidia's Actions: Chip maker Nvidia has divested its stakes in all three companies mentioned.
See More
Nvidia Shares Surge on Expanded Meta Partnership
- Meta Expands Commitment: Meta Platforms announced a new deal to purchase tens of billions of dollars worth of Nvidia chips and hardware for its AI needs, further solidifying their decade-long partnership and expected to significantly boost Nvidia's sales growth.
- Portfolio Update: Nvidia disclosed new stakes worth $2.3 billion in Snap and $1.1 billion in Nokia, while also revealing a $7.9 billion stake in Intel, showcasing its strategic positioning and confidence in the semiconductor market.
- Positive Market Reaction: Nvidia shares rose 1.4% in early premarket trading on Wednesday, reflecting market optimism regarding the new agreement with Meta, while Intel's stock also gained 1% due to Nvidia's investment, indicating investor confidence in the semiconductor sector.
- Hedge Fund Turns Bearish: Despite the stock rally, New York-based Stanphyl Capital has taken a short position on Nvidia, arguing that some hyperscalers will announce reduced capex, potentially leading to a significant drop in Nvidia's stock price, highlighting market uncertainty ahead.
See More
Nvidia Sells Remaining Stake in Arm Holdings
- Share Disposal: Nvidia sold its remaining stake in Arm Holdings, totaling 1.1 million shares valued at approximately $140 million based on Arm's closing price on Tuesday, marking Nvidia's exit from its investment in Arm.
- Failed Acquisition: Nvidia attempted to acquire Arm for $40 billion in 2020, which would have been the largest deal in semiconductor history, but the deal collapsed in February 2022 due to strong regulatory and customer opposition.
- Arm's IPO Plans: Arm, majority-owned by SoftBank Group, is moving forward with plans for a public listing, demonstrating its commitment to independent growth despite the failed acquisition attempt.
- Market Implications: This share sale reflects Nvidia's reassessment of Arm's future and may impact its strategic positioning in the AI chip market, particularly in light of its multi-year partnership with Meta.
See More
Arm Holdings Poised for Strong Recovery Amid AI Market Challenges
- AI Market Volatility: Recently, AI stocks like Microsoft have dropped over 20%, reflecting a broader skepticism about the returns on investments made by large tech companies in AI, which has shaken investor confidence.
- Unique Business Model: Unlike Intel and Nvidia, Arm generates most of its revenue from licensing fees and royalties, with over half of its revenue coming from royalties recently, setting a solid foundation for future income growth.
- Deepening Client Relationships: Companies like Amazon, Google, and Apple are increasingly relying on Arm's designs, particularly with Amazon's Graviton 5 processor, which is expected to significantly boost Arm's royalty revenue in the coming years.
- Future Growth Expectations: While analysts project only a 7% revenue growth for fiscal 2026, they anticipate a more than 23% revenue increase in the following year, indicating Arm's potential for recovery in the AI market.
See More
Nvidia Sells Arm Stake but Maintains Partnership
- Nvidia's Stake Sale: Nvidia's SEC filing on Tuesday revealed it has offloaded its stake in semiconductor firm Arm, yet this does not signify the end of their relationship, as Arm's shares rose 1.4% in premarket trading on Wednesday.
- Shareholding History: By the end of Q3, Nvidia held 1.1 million shares of Arm valued at $155.8 million, having maintained its stake since 2023 while gradually winding it down towards the end of 2024, indicating a strategic shift in its investment approach.
- Market Reaction: When Arm debuted on Nasdaq in 2023, Nvidia was part of a strategic investment group that collectively purchased $735 million in shares, and although its $40 billion acquisition bid failed due to regulatory hurdles, Nvidia retains a 20-year licensing agreement with Arm, continuing to support its technology.
- Financial Performance: Arm's recent earnings report showed a 26% year-on-year sales increase to $1.24 billion, exceeding analyst expectations, although shares fell in after-hours trading, with analysts noting high operating expenses suggest the company is preparing for long-term demand.
See More
Nvidia Sells ARM Stake, Market Reacts Positively
- Nvidia Reduces ARM Stake: Nvidia gradually reduced its stake in ARM by the end of 2024, holding 1.1 million shares valued at $155.8 million; despite the sell-off, Nvidia's 20-year licensing agreement with ARM remains intact, indicating a long-term partnership.
- ARM Earnings Beat Expectations: ARM reported a 26% year-on-year increase in sales to $1.24 billion in its latest earnings report, surpassing analyst expectations and demonstrating strong momentum in AI projects, although its stock fell in after-hours trading, reflecting cautious market sentiment regarding future guidance.
- Positive Market Reaction: Following its Nasdaq debut, ARM's market cap is approximately $135 billion, and Nvidia's stake reduction did not dampen market confidence, as ARM shares rose 1.4% in premarket trading, indicating investor recognition of its long-term growth potential.
- Morgan Stanley Optimistic: Morgan Stanley has an “overweight” rating on ARM with a price target of $135, representing a premium of over 6% from Tuesday's closing price, reflecting a positive outlook on ARM's future performance, particularly in ongoing investments in AI.
See More
Applied Digital and Recursion Pharmaceuticals Shares Decline, Attributed to Nvidia.
- Stock Performance: Applied Digital, Recursion Pharmaceuticals, and WeRide stocks experienced a decline early on Wednesday.
- Nvidia's Actions: Chip maker Nvidia has divested its stakes in all three companies mentioned.
See More
Nvidia Shares Surge on Expanded Meta Partnership
- Meta Expands Commitment: Meta Platforms announced a new deal to purchase tens of billions of dollars worth of Nvidia chips and hardware for its AI needs, further solidifying their decade-long partnership and expected to significantly boost Nvidia's sales growth.
- Portfolio Update: Nvidia disclosed new stakes worth $2.3 billion in Snap and $1.1 billion in Nokia, while also revealing a $7.9 billion stake in Intel, showcasing its strategic positioning and confidence in the semiconductor market.
- Positive Market Reaction: Nvidia shares rose 1.4% in early premarket trading on Wednesday, reflecting market optimism regarding the new agreement with Meta, while Intel's stock also gained 1% due to Nvidia's investment, indicating investor confidence in the semiconductor sector.
- Hedge Fund Turns Bearish: Despite the stock rally, New York-based Stanphyl Capital has taken a short position on Nvidia, arguing that some hyperscalers will announce reduced capex, potentially leading to a significant drop in Nvidia's stock price, highlighting market uncertainty ahead.
See More
Nvidia Sells Remaining Stake in Arm Holdings
- Share Disposal: Nvidia sold its remaining stake in Arm Holdings, totaling 1.1 million shares valued at approximately $140 million based on Arm's closing price on Tuesday, marking Nvidia's exit from its investment in Arm.
- Failed Acquisition: Nvidia attempted to acquire Arm for $40 billion in 2020, which would have been the largest deal in semiconductor history, but the deal collapsed in February 2022 due to strong regulatory and customer opposition.
- Arm's IPO Plans: Arm, majority-owned by SoftBank Group, is moving forward with plans for a public listing, demonstrating its commitment to independent growth despite the failed acquisition attempt.
- Market Implications: This share sale reflects Nvidia's reassessment of Arm's future and may impact its strategic positioning in the AI chip market, particularly in light of its multi-year partnership with Meta.
See More
