Shares of semiconductor company Arm Holdings (ARM +13.00%) are falling this morning after an analyst at Morgan Stanley downgraded the tech stock. Arm stock is also likely under pressure today amid geopolitical uncertainty, as the U.S. war in Iran ratchets up.
Arm's stock is down by 5.7% as of 11:35 a.m. ET.
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Margin pressure and slower growth
Morgan Stanley analyst Lee Simpson said in an investor note that while Arm is making the right moves into artificial intelligence with its AGI-focused CPU, the firm still believes fiscal 2027 growth could be slower due to softening demand and supply constraints. The firm also thinks that Arm's recent move into AGI CPUs could hurt its margins as it ramps up research and development spending.
Simpson downgraded Arm's stock from overweight to equal weight, setting a $150 price target.
Adding to the stock's decline today was the fact that the U.S. has threatened to attack Iran's infrastructure by the end of today, if certain criteria aren't met, including opening the Strait of Hormuz.
Investors are concerned that a prolonged war will keep oil prices elevated and continue to weigh down global economies.
NASDAQ: ARM
Key Data Points
Don't jump ship just yet
Investors may want to take Arm's stock downgrade this morning with a grain of salt. Arm is still a leading processor company, and its recent AGI CPU development could help it further expand its position. While it's smart for investors to keep an eye on R&D spending, avoiding Arm because of near-term spending increases may not be the right strategy.
