Shares of Arm Holdings (ARM +5.05%) were moving higher this week, mostly in response to positive analyst commentary on the chip stock after it slumped at the end of 2025, making its valuation more attractive.
Jensen Huang, the CEO of Nvidia, which is a close partner of Arm, also made bullish comments about AI and the outlook for the new technology at the World Economic Forum in Davos, Switzerland, this week.
According to data from S&P Global Market Intelligence, the stock was up 14.1% on the news in early Thursday afternoon.
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Arm gets a new look from Wall Street
On Wednesday, Susquehanna upgraded its rating on Arm from neutral to positive and kept its price target at $150, saying that a recent sell-off in the stock offered a good buying opportunity. It also credited Arm's development of an AI XPU custom chip and a custom server CPU as key drivers this year.
On Tuesday, DigiTimes also reported that Nvidia-powered Windows on Arm computers were set to come out this year, which could be another key revenue stream for Arm.
NASDAQ: ARM
Key Data Points
What's next for Arm
As a designer of power-efficient CPU architecture, Arm has a sustainable competitive advantage in its industry, which supports the stock's lofty valuation.
However, the company is also well-positioned to benefit long-term from AI, thanks to its royalty model as it collects a royalty every time a product sells with its chip design in it.
It will take time for the AI royalty revenue stream to build, but investors shouldn't underestimate Arm. While it has relatively little revenue compared to other chip stocks, its technology should ensure that it remains at the forefront of the AI era and continues to benefit from growing demand for power-efficient chips.
