Shares of Arm Holdings (ARM -4.15%) jumped last month as investors bought into its new plans to make its own chips, and the narrative that CPU demand was soaring took hold, especially after Intel reported its first-quarter earnings report.
Arm announced that it was developing its own chip for the first time in late March, the Arm AGI CPU, and after an initial bounce on the news, the stock cooled off. However, as tensions in the Middle East eased in April, investors returned to risk-on stocks like Arm, and positive analyst notes began to roll in.
According to data from S&P Global Market Intelligence, the stock finished the month up 39%. As you can see from the chart below, the stock really soared after Intel's report came out late in the month.
What happened with Arm last month
Semiconductor stocks soared broadly last month on favorable news out of the Middle East, increased spending on data center capacity, and continued progress by Anthropic have also helped the sector, as valuations for both Anthropic and OpenAI have soared recently.
Additionally, Arm is well-positioned to capitalize on the growing demand for CPUs, as AI shifts toward inference and agentic AI. Arm's CPU architecture is known for being more power-efficient than the competing x86 CPU architecture from Intel and AMD.
That belief crystallized after Intel's first-quarter earnings report, when the company breezed past expectations and issued better-than-expected guidance. Intel CEO Lip-Bu Tan noted that demand is moving back from GPUs to CPUs, adding, "In recent months, we have seen clear signs that the CPU is reinserting itself as the indispensable foundation of the AI era."
During the month, the company also benefited from several price target hikes, showing that the recent gains are sustainable, even as the stock is expensive.
Image source: Getty Images.
What's next for Arm
Arm reports earnings on Wednesday afternoon, and the report and the earnings call are likely to shed more light on the company's ambitions in silicon.
Analysts are expecting revenue to rise 18.4% to $1.47 billion, and for adjusted earnings per share to tick up from $0.55 to $0.58. Those aren't exactly high-growth numbers, but there's a reason for that. Arm has historically grown at a moderate pace due to its model of licensing its CPU architecture and collecting royalties when those products are sold. However, revenue growth is expected to ramp up as it releases its new AGI CPU.
The company is targeting $25 billion in annual revenue by 2031, with $15 billion coming from its new CPU. A lot could change before then, and there's certainly room for the company to top those forecasts.
