Arm Holdings (ARM) shares surged to near-record levels in premarket trading Thursday, extending a 15% rally from the previous session, as investors piled into the British chip designer on fresh optimism that artificial intelligence data centers will require significantly more central processing units (CPUs). The stock closed Wednesday at $256.73, up 15.05%, after touching an intraday high of $259.44.
The move comes as the AI trade broadens beyond Nvidia's graphics processors to include the less glamorous chips that coordinate data, memory, and software within data centers. The Philadelphia SE Semiconductor Index jumped 4.5% on Wednesday, with Arm and Astera Labs (ALAB) leading the charge, gaining 15% and 17.7%, respectively, as Wall Street rallied ahead of Nvidia's quarterly results.
Bernstein's Bullish Call
Bernstein analyst David Dai ignited the rally by initiating coverage of Arm with an outperform rating and a $300 price target. In a research note, Dai described Arm as "the center of the renaissance of CPUs," arguing that agentic AI—systems capable of performing tasks with minimal human intervention—could drive a fourfold increase in server CPU demand by 2030, according to MarketWatch.
Arm's strategic shift from licensing chip blueprints to designing its own data-center silicon is central to the bull case. In March, the company announced its AGI CPU, its first in-house data-center processor, calling it "a defining moment" for the company as AI reshapes computing architecture.
Revenue Pipeline and Outlook
Arm has disclosed that the AGI CPU already has more than $2 billion in expected demand across fiscal 2027 and 2028. The company reported record fourth-quarter revenue of $1.49 billion this month and issued a first-quarter revenue forecast slightly above Wall Street estimates, though it flagged soft smartphone demand and supply constraints for the new AI chip.
CEO Rene Haas told Reuters in March that Arm expects the new chip to generate roughly $15 billion in annual revenue within about five years. He also confirmed that Arm had received working test chips from Taiwan Semiconductor Manufacturing Co (TSM), which is fabricating the device on 3-nanometer technology.
Competitive Landscape
The competitive read-through is mixed. Intel (INTC) and Advanced Micro Devices (AMD) also manufacture CPUs and have rallied on hopes that AI inference—the process of running AI models after they are trained—will require more general-purpose compute. Nvidia (NVDA) remains the sector's bellwether; it forecast second-quarter revenue above Wall Street expectations and announced an $80 billion buyback, but its shares slipped after-hours as investors weighed competition and supply constraints.
Risks and Overhangs
Risks remain. Arm's stock has moved faster than its revenue trajectory. Reuters reported earlier this month that Arm had enough capacity to meet the first $1 billion of demand for the new chip but had not secured supplies beyond that, while memory shortages continue to weigh on smartphone sales, a key end market for Arm designs.
There is also a legal overhang. Bloomberg News reported that the U.S. Federal Trade Commission is investigating whether Arm is trying to monopolize parts of the semiconductor market through its licensing practices. Arm declined to comment on any possible investigation, while Qualcomm (QCOM) and Arm remain embroiled in a separate commercial dispute.
For now, the stock is trading like a company being re-priced from a mobile-chip licensor to an AI-infrastructure supplier. That is the bull case. The next test is whether Thursday's regular session confirms Wednesday's chase, or whether investors use the early jump to take profits.
