SOFTBANK GRP UNSP/ADR

It was no surprise that stocks moved higher on Friday, as September’s cooler inflation readings sparked the rally. However, Intel INTC stood out in particular after delivering pleasant Q3 results on Thursday evening that showed the chipmaker's turnaround is feasible.
Hitting a fresh one-year high of $41 a share in Friday’s trading session, Intel stock has continued an attention-getting rebound from a 52-week and multi-year low of $17.
The better-than-expected CPI data may also keep the Federal Reserve on track for another interest rate cut, which can be very beneficial to Intel and other chipmakers. That said, let’s see if it’s time to buy Intel stock or fade the rebound in INTC.
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Q3 Marked Intel’s Return to Profitability.. For Now
Marking a return to growth and profitability, Intel reported Q3 net income of $4.06 billion or $0.23 per share, compared to a concerning loss of $16.64 billion in the comparative quarter or -$0.43 a share. Fueling the early morning rally in INTC was that Intel crushed EPS expectations of $0.01.
However, it’s noteworthy that Intel’s profit was largely driven by one-time non-recurring operational gains. This included the divestiture of a majority stake in its programmable chip-unit business, Altera, along with favorable tax treatments and accounting reclassifications related to its restructuring and asset sales.
Notably, while Intel was able to post positive adjusted earnings per share in Q4 last year ($0.13) and Q1 2025 ($0.13) as shown below, the company’s net income for these quarters was -$129 million and -$887 million, respectively.
Image Source: Zacks Investment Research
Intel’s Key Growth Drivers
Intel did cite improved execution, with CEO Lip-Bu Tan emphasizing better operational discipline and strategic focus, especially in manufacturing and research and development (R&D). It’s also noteworthy that lower rates often fuel tech companies by reducing capital spending costs on R&D, hiring, and expansion into new or emerging markets.
Regarding AI, Intel saw strong momentum in AI-related products, such as its purpose-built application-specific integrated circuit (ASIC) chips, accelerators, and AI PCs. AI chips and compute infrastructure lifted Intel’s Data Center and AI (DCAI) division revenue by 5% year over year to $4.1 billion. Overall, Q3 sales rose 3% to $13.65 billion and topped estimates of $13.11 billion.
Strategic AI collaborations are also boosting Intel’s operations in regard to the $5 billion equity investment it received from Nvidia NVDA and $2 billion from SoftBank SFTBY. While Intel now appears to have enough cash to fund capital expenses, a rate cut would also help if more external funding is needed in the form of borrowing and not equity. Of course, what has reshaped investor sentiment the most is that the U.S. Government became Intel’s largest shareholder after converting the $11.1 billion the company received from the CHIPS Act grants into equity.
Intel’s Guidance & Outlook
Intel expects Q4 revenue at $12.8 to $13.8 billion, which fell in range of Zacks' projections of $13.37 billion. Intel forecasts Q4 EPS at $0.08, in line with the Zacks Consensus. Additionally, Intel projects Q4 gross margins of approximately 36.5% and full-year approximate gross capital investments of $18 billion.
Attributed to the deconsolidation of Altera, Intel revised projections for its full-year adjusted operating expenses down to $16.8 billion from $17 billion.
Based on Zacks' estimates, Intel’s total sales are now expected to dip 2% in fiscal 2025 but are projected to rebound and rise 3% in FY26 to $53.76 billion. Intel’s annual EPS is currently slated to swing to $0.12 in FY25 compared to an adjusted loss of 0.13 a share last year. Optimistically, FY26 EPS is projected to rebound to $0.64, although this is well away from Intel's past earnings potential.
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Summary & Final Thoughts
On the surface, Intel’s “strong” Q3 results may look appealing for hopes of a potential turnaround, but there is still much to see. To that point, the chip giant’s return to profitability was largely attributed to divesting Altera and not its core business operations. Still, the modest AI boost and echoes of disciplined cost management are reassuring amid the possibility of another interest rate cut and equity investments from the federal government, Nvidia, and SoftBank.
Given these prospects, it could be too soon to fade the rebound in INTC, although a significant uptick in EPS revisions may be needed for FY26 to ensure a buy rating. For now, Intel stock lands a Zacks Rank #3 (Hold).
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Buy Intel Stock After Favorable CPI Data & Q3 Earnings Beat?

The Trump trade has taken on a literal connotation, with the White House recently investing in several mining and technology companies that have publicly traded stocks.
Historically, the U.S. government has avoided direct ownership of public companies to maintain free-market principles and prevent favoritism. Instead, it usually supports broader industries through grants and subsidies, tax incentives, or regulatory support.
Under President Trump, the White House has broken this precedent, but has focused on critical minerals and national security. This fits under the rare exception where direct equity stakes in public companies are acceptable and are usually tied to a crisis or the nation’s strategic needs.
If you're wondering, the only other major example of direct government investment in public companies was during the 2008 financial crisis, when the U.S. took stakes in banks and automakers to prevent a collapse.
Needless to say, the stocks that are receiving this sort of preferential treatment now are soaring, either hitting or getting closer to their 52-week highs.
Technology & Security
Intel – INTC: The most notable stock on the list, Intel has made headlines in recent months as the U.S. government became its largest shareholder, taking a 10% stake in the iconic semiconductor company to support domestic chip production.
This aligns with national security goals as it relates to technology protocols and defending these interests away from tech competitive frenemies such as China. Notably, the government converted funds Intel received through the CHIPS Act grants into equity, with Intel receiving roughly $11 billion in grants for commercial and military chip production.
Intel’s downturn and recent struggles have been well documented, so the helping hand from the government fits the crisis criteria as well. Optimistically, INTC shares have hit a new 52-week peak of $38, soaring +60% in the last three months. Fueling the rally, Intel has also received a $2 billion investment from Softbank SFTBY along with $5 billion from Nvidia NVDA as part of a deal to co-develop data centers and PC chips.
Image Source: Zacks Investment Research
Mining & Critical Metals
Lithium Americas – LAC: The government has taken a 5% stake in Lithium Americas and its Thacker Pass lithium project in Nevada, alongside a $435 million loan.
The Thacker Project is a joint venture with General Motors GM and is expected to become one of the largest sources of lithium in North America, with the element being essential for electric vehicle production and other technologies. LAC has soared more than +200% in the last three months, recently hitting an all-time high of $9 a share.
Lithium Americas is based in Vancouver, although President Trump has made surprising (and unrealistic) comments about Canada becoming the 51st state.
MP Materials – MP: Headquartered in Nevada, MP Materials produces rare earth minerals, and the investment here is actually at the discretion of the Pentagon. Aiming to counter China’s dominance in rare earth mineral extraction, the Pentagon has invested $400 million in MP Materials, becoming its largest shareholder with a 15% equity stake.
Using a provision from the Defense Production Act to bypass standard procurement laws, the Pentagon’s broader strategy is to secure domestic supply chains for rare earth elements that are used in Defense Systems, including production of the more stealthy and technologically advanced F-35 fighter jets.
In the last 90 days, MP has surged +130%, and is moving closer to its 52-week high of $82 a share.
Trilogy Metals TMQ: Another Canadian mining company, the White House has acquired a 10% stake in Trilogy Metals to support the development of Alaska’s Ambler mining district, which is rich in copper, cobalt, and geranium.
With its projects primarily located in the Ambler mining district, Trilogy Metals' stock has skyrocketed over +300% in the last three months, with TMQ trading near a one-year high of $7 a share.
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Bottom Line
These "White House" stocks all land a Zacks Rank #3 (Hold) at the moment, suggesting the potential improvement to their outlook could be favorable. Thanks to high investor sentiment, it wouldn’t be surprising if these stocks continued to rise, but there could be better buying opportunities ahead, considering their sharp rallies.
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Keeping Track of the Soaring "White House" Stocks: INTC, LAC, MP, TMQ

(RTTNews) - OpenAI, Oracle, and SoftBank announced five new AI data center locations in the United States under Stargate, OpenAI's large-scale infrastructure platform. These new sites, along with the main campus in Abilene, Texas, and ongoing projects with CoreWeave, will bring Stargate's planned capacity to nearly 7 gigawatts and total investment to over $400 billion within three years. This progress puts the companies ahead of schedule to reach their $500 billion, 10-gigawatt goal by the end of 2025.
In July, OpenAI and Oracle agreed to build up to 4.5 gigawatts of additional Stargate capacity. This partnership is expected to exceed $300 billion in investment over five years. Three of the new sites are located in Shackelford County, Texas; Doña Ana County, New Mexico; and a Midwest location that will be announced soon. An additional 600 megawatts may be added near the Abilene site. These projects could generate over 25,000 onsite jobs and tens of thousands more across the country. More locations are still being evaluated.
The other two sites, developed by SoftBank and OpenAI, are expected to scale up to 1.5 gigawatts within 18 months. One is in Lordstown, Ohio, where construction has begun on an advanced data center expected to be operational next year. The second is in Milam County, Texas, and will be built with SB Energy, a SoftBank Group company, which is providing the infrastructure for a fast-deployment facility. These sites aim to speed up development, improve scalability, and reduce costs—making powerful computing more accessible.
The five sites were selected from over 300 proposals submitted by more than 30 states since January. This marks the first round of selections, with more U.S. sites expected as the $500 billion investment target is surpassed.
The new Oracle-developed Stargate sites will join the Abilene campus, which is already active on Oracle Cloud Infrastructure. Oracle began delivering NVIDIA GB200 racks in June, and early AI training and inference workloads have already started using this new capacity to support OpenAI's next-generation research.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

OpenAI, Oracle, SoftBank Unveil $500 Bln Stargate AI Data Centers Across Five U.S. Locations

It’s been almost two decades since Intel Corporation INTC rejected acquiring NVIDIA Corporation NVDA for $20 billion. But now the role has reversed, with NVIDIA investing in Intel. Will this bet lead to a turnaround for Intel, making it a buy now? Let’s explore –
Why Intel Just Had Its Best Day in Nearly 38 Years
At the start of the year, Intel’s shares fell to their lowest level in over a decade. However, Intel’s shares have begun to recover, with INTC stock posting its strongest day since October 1987 on Thursday. Shares jumped 22.8%, bringing year-to-date gains to 52%, surpassing the Semiconductor - General industry’s 24.9% increase.
NVIDIA’s willingness to invest $5 billion in Intel common stock boosted the share price. As part of the deal, NVIDIA will acquire Intel shares at $23.28 each, reflecting a 6.5% discount to INTC’s closing price on Wednesday. Intel’s strategic alliance with NVIDIA could help the struggling chipmaker regain its former glory and become the undisputed tech leader it once was in Silicon Valley.
What’s Behind NVIDIA’s $5B Stake in Intel?
NVIDIA and Intel plan to develop several generations of custom products for data centers and personal computers (PCs) that will accelerate workloads and applications across hyperscale and consumer sectors. For data centers, NVIDIA will integrate Intel’s custom x86 chips into its artificial intelligence (AI) platforms. NVIDIA’s CEO Jensen Huang said that “this historic collaboration tightly couples NVIDIA’s AI and accelerated computing stack with Intel’s CPUs and the vast x86 ecosystem,” citing nvidianews.nvidia.com.
In the PC market, NVIDIA’s RTX GPU chiplets will be combined with Intel’s x86 system-on-chips (SOCs). These new x86 RTX SOCs will power various PCs that demand seamless integration of industry-leading central processing units (CPUs) and graphics processing units (GPUs). Intel CEO Lip-Bu Tan added that “Intel’s x86 architecture has been foundational to modern computing for decades - and we are innovating across our portfolio to enable the workloads of the future,” citing the newsroom.intel.com.
What Does NVIDIA’s $5B Investment Mean for Intel?
Intel’s foundry business has been struggling for a while and is in urgent need of funding. Now, NVIDIA’s investment has become a vital lifeline helping Intel scale up its cutting-edge process nodes. Intel is launching its new 18A process at its manufacturing plants, supporting at least three client generations. The company is also seeking a major client for its 14A node.
Despite a couple of acquisitions, Intel has lagged behind the AI revolution and lost ground to NVIDIA’s dominance. Therefore, partnering with NVIDIA has not only reclaimed Intel’s relevance in the AI-driven tech industry but also provided a much-needed boost to its manufacturing ambitions.
Here Is How to Trade Intel Stock Now
NVIDIA’s $5 billion investment in Intel has revived hopes of a turnaround. Financial support from the Trump administration and SoftBank Group Corp.’s SFTBY $2 billion investment with Intel are some of the other positives. All these developments should encourage investors to stay committed to Intel stock for future gains.
However, new investors should remain cautious. Intel’s financials show little improvement, with revenue growth in the second quarter remaining flat and gross margins under pressure due to increased capital expenditures.
The effectiveness of Tan’s cost-cutting measures is not yet clear, and Intel remains an overvalued stock. This suggests Intel’s share price could fall sharply if there is a significant correction in the broader market. Based on the price-to-earnings (P/E) ratio, Intel trades at 210.83 times forward earnings compared to the industry’s forward earnings multiple of 42.91.
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For now, Intel stock has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks Rank #1 (Strong Buy) stocks here.
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Is NVIDIA's $5B Stake a Signal to Buy, Hold, or Sell Intel Stock?

Intel’s INTC revival as a leading chipmaker has gained traction following Tuesday’s announcement that SoftBank SFTBY had taken a nearly 2% stake in the company worth $2 billion.
Furthermore, the Trump administration is reportedly considering a 10% stake in Intel, which could make the U.S. goverment the company’s largest shareholder in a broader effort to strengthen domestic chipmaking capabilities.
To do so, the government would convert funds that Intel received through the CHIPS Act grants into equity, with Intel receiving roughly $11 billion in grants for commercial and military chip production.
With SoftBank helping to lead the large stake investments in Intel, investors may be starting to believe that the chip giant’s revival is ahead. As one of the market’s top performers this month, Intel shares have surged +18% in August, to largely outpace the broader indexes, with Nvidia NVDA and other AI infrastructure-related stocks starting to lose some of their blazing steam.
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SoftBank’s Strategic Investment in Intel
Known for its bold bets on tech and innovation, it’s noteworthy that Intel CEO Lip-Bu Tan has deep ties with SoftBank after previously serving on the multinational holding company's board of directors from 2020-2022.
Intel and SoftBank also have collaboration efforts in Saimemory, a startup focused on stacked DRAM (Dynamic Random-Access Memory) chips for AI applications.
Seeing Intel as a critical player in expanding AI chip production, SoftBank is heavily invested in artificial intelligence, having a $500 billion data center project, deemed “Stargate” with OpenAI and Oracle ORCL.
This strategic move also positions SoftBank as a key influencer in global chip supply chains, becoming one of Intel’s largest shareholders and deepening its semiconductor portfolio as the majority owner of ARM Holdings ARM while holding stakes in Nvidia and Taiwan Semiconductor TSM as well.
Why SoftBank’s Lifeline to Intel is So Important
With SoftBank’s investment providing a financial lifeline, this will allow Intel financial flexibility to stabilize its operations after posting a $18.8 billion loss in 2024, the chipmaker's first unprofitable year since 1986. Attributing to last year’s loss, Intel’s foundry division has struggled to secure major clients after losing Nvidia as a customer to Taiwan Semiconductor.
Without these large-scale customers or further outside investments, Intel may have to cancel or halt its mega semiconductor factory in Ohio (Ohio One). Notably, Ohio One is one of the most ambitious tech infrastructure projects in U.S. history, which is another reason the Trump administration has planned to assist Intel, seeing the mega-factory as a way to reduce the nation's reliance on foreign chipmakers.
Tracking Intel’s Outlook & Balance Sheet
Showing signs that its revival may be ahead, Intel’s annual earnings are expected to swing back into the black in fiscal 2025 to $0.15 per share, compared to an adjusted loss of -$0.13 a share last year. Reassuringly, Intel’s FY26 EPS is projected to rebound to $0.68.
On the top line, Intel’s total sales are currently slated to dip over 1% this year, but are projected to rebound and rise 4% in FY26 to $54.2 billion. However, FY26 sales projections would still be well away from Intel’s multi-year peaks of $79 billion in 2021.
Image Source: Zacks Investment Research
Regarding Intel’s financial health, the company has a solid balance sheet, having $192.52 billion in total assets at the end of Q2 compared to $86.76 billion in total liabilities. Plus, Intel has over $21 billion in cash & equivalents as shown in the quarterly chart below.
Image Source: Zacks Investment Research
Monitoring Intel’s P/S Valuation
The price-to-sales ratio (P/S) may be a better way to track Intel's value to investors at the moment rather than the P/E ratio. In this regard, INTC does trade near the preferred level of less than 2X forward sales, with the S&P 500 at 5.5X, and many chip peers such as Nvidia and Taiwan Semiconductor still trading at hefty premiums to these levels.
Image Source: Zacks Investment Research
Bottom Line
SoftBank’s investment in Intel certainly signals confidence in the chip giant’s turnaround and future relevance. That said, after such a sharp rally this month, Intel stock lands a Zacks Rank #3 (Hold), although investors are starting to get more reassurance for what is hopefully a continued rebound at some point.
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Is Intel's Revival Ahead After SoftBank's $2 Billion Investment

Market News
U.S. stocks ended higher on Wednesday after President Trump announced a $500 billion investment in AI infrastructure. Market participants also reacted positively to strong fourth-quarter results. The Nasdaq Composite, the Dow Jones, and the S&P 500 ended the day in the green zone.
How Did the Benchmarks Perform?
The Dow Jones Industrial Average (DJI) rose 0.3% or 130.92 points to close at 44,156.73. Within the 30-stock index, 13 components ended in positive territory, while 17 ended in the negative zone.
The tech-heavy Nasdaq Composite advanced 252.56 points or 1.3% to 20,009.34.
The S&P 500 gained 0.6%, or 37.13 points, to end at 6,086.37. Two of the 11 sectors of the benchmark index ended in positive territory. The Technology Select Sector SPDR (XLK) gained 2.3%, while the Utilities Select Sector SPDR (XLU) fell 2.2%.
The fear-gauge CBOE Volatility Index (VIX) increased 0.3% to 15.10. A total of 13.89 billion shares were traded on Wednesday, lower than the last 20-session average of 15.33 billion. The S&P 500 posted 39 new 52-week highs and four new lows. The Nasdaq Composite recorded 104 new highs and 95 new lows.
Trump Announced $500 Billion Investment in AI Infrastructure
On Jan. 21, 2025, U.S. President Donald Trump unveiled a private sector investment of $500 billion to develop the nation’s AI infrastructure. An initiative led by OpenAI, SoftBank Group Corp. SFTBY, and Oracle Corporation ORCL includes the construction of data centers and the creation of over 100,000 jobs. The companies have agreed to $100 billion upfront and more funding to follow over four years. The data centers, already under construction in Texas, aim to power AI innovations like healthcare applications. Therefore, news of the partnership prompted shares of Oracle and SoftBank to rise 6.8% and 11.4%, respectively on Jan. 22, 2025.
Solid Q4 Earnings Results
The Travelers Companies, Inc. TRV reported fourth-quarter 2024 adjusted earnings of $9.15 per share, which surpassed the Zacks Consensus Estimate of $6.5. Revenues of $12.06 billion beat the Zacks Consensus Estimate by 1.01%.
Netflix, Inc. NFLX reported fourth-quarter 2024 adjusted earnings of $4.27 per share, beating the Zacks Consensus Estimate of $4.20. Revenues of $10.25 billion beat the Zacks Consensus Estimate by 1.29%.
Capital One Financial Corporation COF reported fourth-quarter 2024 adjusted earnings of $3.09 per share, beating the Zacks Consensus Estimate of $2.66. Revenues of $10.19 billion beat the Zacks Consensus Estimate by 0.32%.
Consequently, shares of The Travelers Companies, Netflix and Capital One Financial Corporation rose 3.2%, 9.7% and 4%, respectively. Each of the three companies carries a Zacks Rank #3 (Hold). You can see the complete list of today's Zacks #1 Rank stocks here.
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Stock Market News for Jan 23, 2025

The artificial intelligence (AI) rally just keeps getting bigger. The latest stock to get caught up in the AI mania is Arm Holdings PLC (ARM), which listed on the Nasdaq in September.
On Feb. 8, ARM shares surged 47.8% after AI spending boosted the chip designer’s forecast. CEO Rene Haas said the opportunity presented by AI is still in its early stages, telling Bloomberg TV, “AI is not in any way, shape or form a hype cycle. We believe that AI is the most profound opportunity in our lifetimes, and we’re only at the beginning.”
Notably, his remarks pretty much echoed what Nvidia (NVDA) said after the blowout quarter it reported after the close last night.
In its blockbuster earnings report, Arm projected revenue of $850 million to $900 million for the March quarter, which far exceeded analysts’ forecasts of $778 million. Adjusted earnings per share were projected to be roughly 30 cents, well ahead of Wall Street’s 21-cent estimate. Arm also raised its sales forecast for fiscal 2024 to a range between $3.16 billion and $3.21 billion.
For those of you unfamiliar with Arm, it is 90%-owned by Japan’s Softbank Group (SFTBY). Its technology is going into an ever-widening array of products, from smartphones to cars to appliances.
The company sells chip design licenses to manufacturers for the fundamental set of instructions that software uses to communicate with chips. These companies, in turn, pay royalties to Arm on each unit shipped. Its unique role in the semiconductor industry also involves providing so-called design blocks that companies such as Qualcomm (QCOM), Amazon (AMZN), and Apple (AAPL) use to build their processors.
The key characteristic of Arm’s chip designs is that they use less energy per unit of performance than their rivals, which has helped them to become the industry standard for mobile processors - where Arm's market share is 99%. Power efficiency has also helped the company take significant share in data center chips, where energy use is an increasingly important consideration.
Arm and AI
Arm does have major tailwinds at its back, as its customers shift to a new version of its technology called V9, which carries twice the royalty rate of its predecessors. And they’re using more Arm computing cores per device — over 100 in Microsoft’s (MSFT) new server chips, for example — which boosts royalties. Arm is also gaining market share from rival technology in the aforementioned data centers market, as well as the automotive market.
Nvidia’s Grace Hopper, Microsoft’s Cobalt and Amazon’s Graviton - used to run large language models - are all based on Arm’s newest V9 chip design. The V9 now makes up 15% of the company’s overall royalty revenues, up from 10% during the last quarter. I expect this number to continue expanding quite rapidly as Arm’s management continues to move its business away from the smartphone market, which is showing little growth, and toward AI-related sectors.
The recently mauled Arm bears would argue that Arm is mainly a CPU (central processing unit) company, while AI computing is driven primarily by GPUs (graphics processing units), which are Nvidia's bread and butter.
They have a point, but they are misreading the story. Arm is a data center story. Yes, the core AI jobs will be done by GPUs. But there are lots of ancillary computing tasks that need to be done, such as serving web pages, gathering data, and formatting it for AI.
So, Arm is part of the AI story. If you look at the overall computing infrastructure, there is going to be a lot of change, with data centers being rebuilt. Arm will be a major player in that rebuild, which is perhaps why Nvidia itself recently disclosed an investment worth $147.3 million in the company it once tried to acquire.
Why Buy Arm Stock?
There are several reasons to buy Arm stock.
First, the company has a huge amount of room to increase the royalty rates it charges customers that use its chip designs, especially now that its designs are becoming an integral part of the new data center/AI computing infrastructure. Keep in mind that it only charges phone makers $0.50 per phone sold for its mobile CPU designs.
And even if we ignore Arm’s improving fundamentals, there is another reason its stock could be in store for more fireworks after the massive post-earnings rally. SoftBank sold less than 10% of Arm during the IPO, holding on to most of its shares so that it would be able to borrow money against the stock. This will obviously restrict the supply of stock out there over the longer term, which should help increase the stock’s value.
I also believe Arm will keep gaining market share in the cloud computing and automotive sectors. Energy consumption is one of data center’s main expenses, so energy efficiency is paramount. In automotive, the transition to electric vehicles (EVs) creates demand for more efficient chips, as well.
Arm chips will continue to see growth from AI, as they are used in conjunction with GPUs in data centers and to enable on-device AI features in smartphones.
And Arm is in a financially healthy position, with $1.6 billion of cash on hand and no debt.
Buy Arm stock under $150 a share.
On the date of publication, Tony Daltorio did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

Why Arm Holdings Is the Next Must-Have AI Stock

Shares of Softbank (SFTBY)-backed Arm Holdings (NASDAQ:ARM) made a stellar stock market debut on September 14, rallying 25% on the first trading day. However, the chip design company’s stock quickly shed those gains and currently trades at $52.51, which is below the closing stock price of $63.59 on September 14. Wall Street analysts are cautious about the stock due to several concerns, including its high valuation and exposure to China.
Wall Street is Sidelined on ARM Stock
Arm does not manufacture chips but licenses its architecture to other chipmakers and original equipment manufacturers (OEMs). The company claims that its central processing units (CPUs) have enabled advanced computing in over 99% of smartphones worldwide. Arm’s technology also powers operating systems and applications for mobiles, personal computers, tablets, data centers, networking equipment, and vehicles, among other things.
However, Arm faces competition from the open-source RISC-V chip architecture, which gaining traction, with many of Arm’s customers also showing interest in it. The company also faces competition from the advanced x86 architecture developed by chip giants Advanced Micro Devices (NASDAQ:AMD) and Intel (NASDAQ:INTC). While ARM leads the smartphone end market, these rival technologies have a strong hold over the laptop and data center end markets.
Other risks to be noted include the company’s exposure to China amid the growing U.S.-China tensions and weakness in top-line growth due to a dull smartphone market. Another risk is revenue concentration, with the company’s top five customers (including Arm China) accounting for about 57% of the overall revenue in the fiscal year ended March 31, 2023.
On September 22, Susquehanna analyst Mehdi Hosseini initiated coverage of Arm Holdings stock with a Hold rating and a price target of $48. The analyst thinks that stock has a fairly valued risk/reward. He also pointed out the weakness in the mobile market, the company’s largest end market. Additionally, the microcontroller market, Arm’s second largest end-market, has started to reach market share saturation.
The analyst is concerned that if Arm tries to achieve further growth in these areas by forcing a higher royalty rate, it might incentivize customers to explore alternatives.
Meanwhile, on September 25, Bernstein analyst Sara Russo reiterated a Sell rating on ARM stock with a price target of $46. While the analyst likes the company’s fundamentals and its dominant position in mobile, she feels that the company is not immune to the sluggish smartphone market. The analyst believes that it will take time to see improvements in mobile royalty rates.
Russo said that her estimates for mobile royalty rates in FY27 and consequently revenue growth expectations remain below management’s estimates.
Is Arm Holdings a Good Stock to Buy?
Currently, Wall Street has a Hold consensus rating on Arm Holdings stock based on one Buy, three Holds, and one Sell rating. The average price target of $50.75 implies a possible downside of 3.4%.
Conclusion
Arm Holdings expects its total addressable market to grow at a 6.8% compound annual growth rate to about $246.6 billion by 2025, driven by prospects in lucrative areas like artificial intelligence and cloud computing. However, Wall Street feels that the positives are already baked into the stock and does not see any upside due to the risks discussed above.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.