Arm’s AI Chip Fits “Core Strength in Low Power” — Stock Soars 16% on Massive Target Boosts

Shares of British chip designer Arm Holdings ARM -6.89% ▼ jumped over 16% on Wednesday as more analysts hailed its pivot towards AI chipmaking with the introduction of the AGI CPU. Wall Street greeted the move with massive price target boosts, with Barclays BCS -2.03% ▼ noting that the technology taps into Arm’s “core strength in low power.”

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The launch of the chip, which is expected to enter full production in the second half of this year, marks a shift in business model for Arm. The Cambridge-based company’s core business has long been licensing out its chip designs to partners such as Nvidia NVDA -2.17% ▼ .

Now, Arms company is working with AI heavyweights Meta META -3.99% ▼ and OpenAI to achieve the milestone.

Barclays Hails ‘Strength in Energy Efficiency’

Reacting to the update, Barclays’ five-star analyst Tom O’Malley lifted his ARM price target by about 21%, from $165 to $200, implying about 27% upside. The analyst also reaffirmed his Buy rating on Arm’s shares, noting that the chip “plays into Arm’s strength in energy efficiency.”

O’Malley’s note comes as the huge energy demand of AI chips and data centers has emerged as a key bottleneck to hyperscalers, forcing chipmakers and contract manufacturers alike into a race to develop energy-efficient chips. The analyst expects Arm to roll out more customer announcements and product launches related to the move and sees the pivot fetching upsides for the company into the end of the decade.

Evercore Sees Road to $15B Revenue

Chipping in, Evercore ISI analyst Mark Lipacis called Arm “a key beneficiary of agentic [or autonomous] AI,” and sees the new chip helping to propel the chip designer to a revenue of $15 billion by fiscal 2031. The five-star analyst maintained his Buy rating on ARM, elevating his price target by a much larger 34%.

Lipacis lifted his price target from $170 to $227, implying about 45% upside.

Is ARM Holdings a Strong Buy?

Arm’s shares currently enjoy a Strong Buy consensus rating from analysts. This is based on 20 Buys, four Holds, and one Sell issued by 25 analysts over the past three months.

However, the average ARM price target of $170.86 only indicates about 9% growth potential.

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