Shares of Arm Holdings (ARM +2.79%) rallied 14.9% on Friday as of 12:02 p.m. EDT.
Arm was rallying alongside Intel (INTC +2.64%) and Advanced Micro Devices (AMD +3.42%) today, following Intel's strong earnings release last night.
Intel's data center business showed outsize growth in the first quarter, despite supply constraints. The outperformance confirmed recent reporting that CPU demand was taking off amid the advent of agentic AI.
That stands to benefit all CPU designers, including Arm, which has traditionally licensed its architecture to third parties, but recently unveiled its own custom-designed chip.
NASDAQ: ARM
Key Data Points
Agentic AI is causing a massive CPU boom
Last night, Intel trounced earnings expectations and its own guidance, largely on the back of its data center CPU segment. The data center segment grew 8.5% quarter over quarter, which would compound to an annualized 39% growth rate. Margins also expanded on the back of reported price increases for the latest data center CPUs. Additionally, management noted that growth would have been substantially higher had it not been for supply constraints.
On the conference call with analysts, CEO Lip-Bu Tan and CFO David Zinsner noted that traditional CPUs are now in strong demand due to the growing adoption of agentic AI systems. Agentic systems have emerged over the past six months or so that go beyond merely answering a chatbot's questions. Agents are AI-driven autonomous systems that can set goals, plan, and take actions to perform tasks without human supervision.
In the question and answer session, Zinsner noted that the agentic revolution is causing the ratio of GPUs to CPUs to flip back toward CPUs, which are actually more efficient at completing an agent's work:
If you look at training solutions, they are generally running seven to eight GPUs to one CPU. As we look into inference, it is probably three to four to one. As you get into agentic and multi-agent, it can even flip the other way a little bit. That is one way to think about it. As you think about the growth rate going forward, it will become a significant part of the AI TAM.
The first wave of AI investment definitely went toward GPUs, but the huge demand soon spread to memory, and now, apparently, CPUs. That's good news for Arm, which licenses its architecture to third parties such as Nvidia (NVDA +1.30%) for its Vera CPUs, as well as cloud hyperscalers designing their own custom CPUs. Additionally, Arm itself just unveiled its first-ever custom data center CPU in late March, the Arm AGI CPU.
Image source: Getty Images.
CPU companies are skyrocketing
Investors appear to have sniffed out the reacceleration in CPU demand in 2026, after OpenClaw, the famous (or infamous) open-sourced AI agent, emerged late last year.
Arm Holdings is already up 110% on the year after today's surge, and the stock trades at over 300 times earnings and over 100 times 2027 earnings estimates.
That's a nosebleed valuation for sure; however, if we are truly just at the beginning of the agentic AI revolution that will last for years or decades, and if Arm can remain competitive versus Intel and AMD, it's not a totally crazy valuation.
