Arm shares slide amid analyst upgrades on AI CPUs

Arm Holdings shares fell 4.7% to $349.03 on Wednesday and were down about 19% since the start of the week. The stock has gained roughly 227% year-to-date and about 127% over the past 12 months.

UBS raised its price target to $470 from $260 and maintained a Buy rating. TD Cowen increased its target to $475 from $265 and reiterated a Buy. Both targets imply roughly one-third upside from Wednesday’s trading level. Bank of America earlier lifted its target to $460 from $335 and kept a Neutral rating.

UBS analyst Timothy Arcuri wrote that the central investor question is the revenue potential for Arm’s standalone CPUs and projected those revenues could reach about $14 billion by 2030. He added that Arm’s internal chip business is unlikely to be financially material before fiscal 2028 and that the company’s focus on latency and efficiency matches hyperscaler needs.

TD Cowen wrote that shifting AI workloads are increasing the role of CPUs relative to GPUs and described Arm’s goal of $15 billion in annualized AGI CPU revenue by fiscal 2031 as reasonable. The firm identified GPU-to-CPU attachment rates and per-core pricing as key variables for that outlook.

Arcuri wrote, ‘The real investor debate, in our view, is revenue potential for Arm’s standalone CPU.’

Arm historically earns revenue by licensing its instruction-set architecture and collecting royalties from customers including Apple, Nvidia, Samsung and Qualcomm. Its architecture is the main alternative to the x86 design used by Intel and AMD. The company has been moving from pure IP licensing into designing and producing full chips, creating new revenue streams and debate about the timing and scale of those revenues.

Some analysts cautioned against applying Nvidia-based CPU market assumptions directly to Arm. Investors rotated away from several AI-related stocks this week, a shift that coincided with the pullback in Arm shares.

Analysts who raised targets cited potential gains from AI infrastructure spending, while their forecasts differ on when and how large Arm’s in-house CPU revenue will become.