Data News > Chip Index Plunges 8% as Arm Dampens AI Optimism
- U.S. chip stocks experience worst day since 2020 after Arm Holdings' conservative forecast
- Arm Holdings considered overvalued with stock trading below $100 suggested valuation
- Stock poised for expansion in AI and auto markets, but analysts raise concerns about valuation
- Arm stock declines despite beating sales and earnings expectations
- Arm shares plummet following downbeat revenue forecast clouding potential AI upside
The U.S. chip index took a nosedive on Thursday, plunging 8% in what is considered the worst day for chip stocks since 2020. This drastic drop came after Arm Holdings, a major player in the chip industry, delivered a conservative forecast that deflated investor optimism surrounding artificial intelligence and data, leading to concerns about a cooling economy.
Prior to its first quarter earnings in 2025, Arm Holdings was deemed overvalued, with its valuation mostly driven by the excitement over artificial intelligence rather than anticipated growth rates. With the chip company warning of a possible sales decline in the second quarter, experts believe that the stock's trading at 92 times the FY25 EPS targets indicates a valuation below $100 may be more appropriate.
While analysts acknowledge the potential for Arm Holdings to expand in the lucrative AI and auto markets, there are growing concerns about the stock's valuation. Goldman Sachs analyst Toshiya Hari maintained a Buy rating on Arm Holdings, setting a price target of $144, slightly above the previous target of $143. Despite the slide in Arm's stock price, some analysts continue to express optimism about the company's future prospects.
Following disappointing royalty revenue figures, Arm Holdings experienced a 17% drop in its stock price on Thursday. Despite surpassing sales and earnings expectations, the stock failed to meet the lofty targets set by Wall Street, triggering the negative market response.
Arm Holdings faced a 16% decline in shares during afternoon trading, attributed to the chip company’s lackluster revenue forecast which raised doubts about its ability to capitalize on the growing demand for AI technologies in comparison to its competitors. The subdued outlook cast a shadow over the potentially bright future that had been anticipated for Arm Holdings in the AI sector.
Arm Holdings suffered a major setback as its full-year outlook fell short of expectations, sending the stock deep into the red. Despite positive quarterly results, the company’s guidance failed to meet the high hopes of Wall Street investors.
Arm Holdings CEO Rene Haas expressed confidence in the company's long-term prospects during an interview, highlighting the integration of AI and other technologies. However, market analysts remain cautious, pointing out the challenges that Arm faces in certain sectors despite strong potential in others.
In the wake of robust earnings from Meta and soft guidance from Arm Holdings, the chipmaker saw a significant drop in its share price despite exceeding profit and sales forecasts. While Arm Holdings reported record revenues for the fourth consecutive quarter, the stock tumbled nearly 12% on the Nasdaq.
Although Arm Holdings continues to design innovative microprocessors for various applications, the stock experienced an 8% decline after maintaining unchanged fiscal 2025 guidance. Despite strong revenue growth rates and promising prospects in various sectors, the stock's valuation at 60 times next year's EPS is seen as high, requiring investors to exercise patience.
Following a lackluster first-quarter report and weak guidance, Arm Holdings faced a drop in its stock price despite showing strong revenue growth. The company's decision to withhold chip volume disclosures added to concerns about its future performance.
Despite outperforming expectations in the quarterly results, Arm Holdings encountered a sharp decline in its stock price, triggering a premarket plunge. As investors assess the situation, some analysts believe that it may present a buying opportunity for those looking to benefit from potential future growth.
As Arm Holdings shares falter in the aftermath of disappointing earnings, J.P. Morgan analysts maintain a positive outlook, viewing the dip in stock price as a potential opportunity for investment. Keeping a close watch on price levels may offer insights into potential buying opportunities as the situation unfolds.
In light of the challenges faced by Arm Holdings, particularly in relation to profit guidance, equity research analyst Rolf Bulk describes the chipmaker as a "difficult company to own." Despite its struggles, market analysts and investors alike continue to monitor Arm's performance and future prospects closely.
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Chip Index Plunges 8% as Arm Dampens AI Optimism
By KlickAnalytics Data Insights | August 1, 2024 08:02PM ET
Key Points
- U.S. chip stocks experience worst day since 2020 after Arm Holdings' conservative forecast
- Arm Holdings considered overvalued with stock trading below $100 suggested valuation
- Stock poised for expansion in AI and auto markets, but analysts raise concerns about valuation
- Arm stock declines despite beating sales and earnings expectations
- Arm shares plummet following downbeat revenue forecast clouding potential AI upside
The U.S. chip index took a nosedive on Thursday, plunging 8% in what is considered the worst day for chip stocks since 2020. This drastic drop came after Arm Holdings, a major player in the chip industry, delivered a conservative forecast that deflated investor optimism surrounding artificial intelligence and data, leading to concerns about a cooling economy.
Prior to its first quarter earnings in 2025, Arm Holdings was deemed overvalued, with its valuation mostly driven by the excitement over artificial intelligence rather than anticipated growth rates. With the chip company warning of a possible sales decline in the second quarter, experts believe that the stock's trading at 92 times the FY25 EPS targets indicates a valuation below $100 may be more appropriate.
While analysts acknowledge the potential for Arm Holdings to expand in the lucrative AI and auto markets, there are growing concerns about the stock's valuation. Goldman Sachs analyst Toshiya Hari maintained a Buy rating on Arm Holdings, setting a price target of $144, slightly above the previous target of $143. Despite the slide in Arm's stock price, some analysts continue to express optimism about the company's future prospects.
Following disappointing royalty revenue figures, Arm Holdings experienced a 17% drop in its stock price on Thursday. Despite surpassing sales and earnings expectations, the stock failed to meet the lofty targets set by Wall Street, triggering the negative market response.
Arm Holdings faced a 16% decline in shares during afternoon trading, attributed to the chip company’s lackluster revenue forecast which raised doubts about its ability to capitalize on the growing demand for AI technologies in comparison to its competitors. The subdued outlook cast a shadow over the potentially bright future that had been anticipated for Arm Holdings in the AI sector.
Arm Holdings suffered a major setback as its full-year outlook fell short of expectations, sending the stock deep into the red. Despite positive quarterly results, the company’s guidance failed to meet the high hopes of Wall Street investors.
Arm Holdings CEO Rene Haas expressed confidence in the company's long-term prospects during an interview, highlighting the integration of AI and other technologies. However, market analysts remain cautious, pointing out the challenges that Arm faces in certain sectors despite strong potential in others.
In the wake of robust earnings from Meta and soft guidance from Arm Holdings, the chipmaker saw a significant drop in its share price despite exceeding profit and sales forecasts. While Arm Holdings reported record revenues for the fourth consecutive quarter, the stock tumbled nearly 12% on the Nasdaq.
Although Arm Holdings continues to design innovative microprocessors for various applications, the stock experienced an 8% decline after maintaining unchanged fiscal 2025 guidance. Despite strong revenue growth rates and promising prospects in various sectors, the stock's valuation at 60 times next year's EPS is seen as high, requiring investors to exercise patience.
Following a lackluster first-quarter report and weak guidance, Arm Holdings faced a drop in its stock price despite showing strong revenue growth. The company's decision to withhold chip volume disclosures added to concerns about its future performance.
Despite outperforming expectations in the quarterly results, Arm Holdings encountered a sharp decline in its stock price, triggering a premarket plunge. As investors assess the situation, some analysts believe that it may present a buying opportunity for those looking to benefit from potential future growth.
As Arm Holdings shares falter in the aftermath of disappointing earnings, J.P. Morgan analysts maintain a positive outlook, viewing the dip in stock price as a potential opportunity for investment. Keeping a close watch on price levels may offer insights into potential buying opportunities as the situation unfolds.
In light of the challenges faced by Arm Holdings, particularly in relation to profit guidance, equity research analyst Rolf Bulk describes the chipmaker as a "difficult company to own." Despite its struggles, market analysts and investors alike continue to monitor Arm's performance and future prospects closely.
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