In less than a week, the stock market valuation of UK chip designer Arm Holdings nearly doubled. It happened due to investor wagers on the expansion of artificial intelligence (AI).
Last Wednesday, the Cambridge, Massachusetts-based company released its financial results. It demonstrated how the market for AI-related technologies is driving up revenues.
Almost all smartphones in use today are powered by Arm chips. SoftBank of Japan bought the company private in 2016, and it went back on the public market in September of last year.
According to the company’s results released last week, Arm’s shares have surged and are currently up more than 98%. It happens at the same time when the value of chipmaker Nvidia’s stock has more than tripled over the past year due to the surge in demand for its AI chips.
With a stock market capitalization of about $1.8 trillion (£1.4 trillion), Nvidia is now among the most expensive publicly traded businesses in the world thanks to the AI boom.
It also makes it the fifth publicly traded US corporation to become a member of the prestigious “Trillion-dollar club”. The first four tech behemoths members are Apple, Microsoft, Alphabet, and Amazon.
Arms technology is not used for artificial intelligence work directly. But chip-making companies like Nvidia are using it to support their AI-focused chips. Nvidia is using it in their central processing units (CPUs).
In addition to Nvidia and Taiwan Semiconductor Manufacturing Company (TSMC), well-known consumer companies like Apple are among Arm’s clientele.
The auto industry is seeing an increase in demand for Arm-designed processors. It is because of the advancements in autonomous driving technologies.
In the university city of Cambridge, a group of chip inventors formed Arm in 1990. For $32 billion, SoftBank purchased it in 2016. The Japanese corporation declared its intention to sell Arm to Nvidia four years later. But in April 2022, SoftBank canceled the agreement due to opposition from international regulators. The corporation announced that it would instead sell Arm shares on the New York stock exchange, the Nasdaq.
SoftBank is relieved about the increase in Arm’s shares. It has already suffered losses because of declining asset values, notably the troubled office space company WeWork. Over the last week, SoftBank has seen a nearly 30% increase in its shares. It still owns around 90% of Arm.
