AI Enthusiasm Fuels Chip Rally
Arm Holdings' U.S.-listed shares surged 11.6% on Friday to close at $123.70, marking an 18% two-day recovery following recent volatility. The advance coincided with a broader semiconductor rally driven by expectations of increased artificial intelligence data center investment. Amazon's announcement of plans to boost capital expenditures by over 50% this year, following similar signals from Alphabet, helped fuel the sector's momentum.
Smartphone Segment Pressured by Memory Constraints
Despite the AI-driven optimism, Arm faces challenges in its smartphone business. The company's Chief Financial Officer Jason Child indicated royalty revenue could be reduced by up to 2% over the coming year due to memory shortages affecting handset production. Industry research firm Counterpoint projects shipments of advanced smartphone chips will decline 7% in 2026. Qualcomm's CEO Cristiano Amon noted the broader sector is grappling with memory supply issues and price increases.
Arm recently reported fiscal third-quarter revenue of $1.24 billion, representing 26% year-over-year growth, with adjusted earnings of 43 cents per share. Royalty revenue climbed 27% to $737 million, while licensing revenue of $505 million slightly missed analyst estimates. The company provided fourth-quarter revenue guidance of $1.47 billion, exceeding consensus expectations.
Investors Eye Upcoming "Arm Everywhere" Event
Market participants are now focusing on Arm's scheduled "Arm Everywhere" event in San Francisco on March 24, which the company has promoted as an AI-focused gathering featuring partners and executives. The event will be webcast live from 10:00 a.m. to 4:30 p.m. Pacific time.
The central question for investors remains whether robust AI infrastructure demand can sufficiently offset softening consumer electronics segments, particularly smartphones. While the recent rebound demonstrates optimism about Arm's AI prospects, the company's business model—split between upfront licensing fees and per-chip royalties—remains exposed to smartphone market fluctuations. Traders will monitor whether Friday's gains hold through Monday's trading session and await further clarity from the March event.
