Arm Holdings (ARM) shares closed sharply higher on Wednesday, gaining 5.69% to $418.88 on the Nasdaq, after touching an intraday high of $444.80. The surge came on the heels of a bullish analyst note from Bernstein, which raised its price target on the British chip designer to $500 from $300, maintaining an Outperform rating.
The upgrade underscores a broader shift in investor focus from graphics processing units (GPUs) to central processing units (CPUs) as artificial intelligence workloads evolve. Bernstein analyst David Dai highlighted what he called a CPU "renaissance" driven by the rise of agentic AI—autonomous systems that perform tasks with minimal human intervention. These workloads, Dai argued, require more CPU horsepower in addition to traditional accelerators, positioning Arm to benefit from its power-efficient architecture and transition from licensing intellectual property to manufacturing its own CPUs.
Arm's rally was part of a wider move in CPU-related names. Bernstein also raised price targets for Advanced Micro Devices (AMD) and Intel (INTC). AMD ended the day up 1%, while Intel advanced 3.5%. Arm outperformed both, with analysts pointing to its royalty-based business model, which expands as more chipmakers and cloud providers adopt its designs.
The company has been actively pitching its growth story. In May, Arm reported fiscal fourth-quarter revenue of $1.49 billion and full-year revenue of $4.92 billion. Management noted that customer demand for its Arm AGI CPU exceeds $2 billion through fiscal 2027 and 2028, signaling strong forward visibility.
However, the trade is not without risks. Reuters reported last month that Arm had not secured supply lines for the next $1 billion in new chip orders, raising concerns about its ability to meet surging demand. Meanwhile, a tight memory chip supply has weighed on smartphone demand, which directly impacts Arm's royalty income. "They were good numbers, but not good enough," Seaport Research Partners analyst Jay Goldberg commented at the time. Michael Ashley Schulman of Cerity Partners called the supply worry a "party spoiler."
Regulatory scrutiny adds another layer of uncertainty. According to a Bloomberg report cited by Reuters, the U.S. Federal Trade Commission is investigating Arm's licensing practices for semiconductor technology as part of a broader probe into the company's business practices. The outcome of such an investigation could alter Arm's competitive landscape.
Looking ahead, traders face a shortened week with U.S. markets closed on Friday, June 19, for Juneteenth. That leaves only Thursday for investors to decide whether to continue buying into the Arm rally following the price target upgrade or to lock in profits after the stock's recent rapid gains.
