Big bucks for… the big guys?

15 February 2024
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  • ARM stock prices get a huge hike thanks to AI technology demand.
  • The chip maker’s earnings announcement last week caused the stock price to soar. 

After returning to the stock market in September last year, UK chip designer ARM Holdings has seen its value almost double in less than a week. The company, based in Cambridge, reported financial results last Wednesday, showing that AI-technology demand is boosting its sales.

This isn’t exactly a tale of the little guy making it, given that chips designed by ARM already power almost every smartphone in the world. Since the earnings announcement last week, shares have soared and are now up by more than 98%.

Nvidia, another big name in the chip sector, has actually seen its shares more than triple in value over the last year. Demand for AI chips is responsible, the boom having helped Nvidia become one of the most valuable publicly-traded companies in the world.

Its stock value is a jaw dropping $1.8 trillion, making it the fifth US company to join the “trillion-dollar club” alongside other technology giants Apple, Microsoft, Alphabet and Amazon.

What’s slightly different for ARM is that its technology isn’t used directly in AI work. Instead, other chip makers including Nvidia are choosing to use it for central processing units (CPUs) that work well with AI-specific chips.

Taiwan Semiconductor Manufacturing Company (TSMC) also uses ARM’s chips. Combine these two major customers with the rest of the consumer-focused companies that buy from ARM, and you’ve got huge revenue potential.

What’s more, self-driving technology means demand for ARM-designed chips is growing in the car making industry.

All this is a bit of a redemption arc for the company. ARM was founded in 1990 by chip makers in Cambridge and bought by SoftBank some 25 years later in 2016 for $32bn. Four years later, plans were announced to sell ARM to Nvidia.

Then, come April 2022, the deal was shelved by SoftBank after regulators around the world objected. Instead, it said it would sell shares in ARM on the New York Nasdaq stock exchange.

The rise in share value, then, is good news for SoftBank, proving the wisdom of its decisions – particularly since it’s been hit by losses due to the dropping value of other investments like WeWork, the office space firm.

SoftBank holds a roughly 90% stake in ARM and has seen its own shares grow almost 30% in the last week.

That failed plan to sell to Nvidia is also seeing some recuperation as it disclosed investments in ARM with a stake in the company now that’s worth $147.3m.

So, listen up all you AI naysayers. If there’s one thing that the technology is doing for humanity, it’s making huge sums of money for the corporations that experienced some minor losses a few years ago. And that’s worth something.