Arm Holdings stock had a strong Wednesday, closing up 3.93% at $251.06 before extending gains in after-hours trading to $263, a further 4.76% move.
Arm Holdings plc American Depositary Shares, ARM
The catalyst was an expanded collaboration with IBM announced earlier this week. Under the deal, IBM will bring Arm architecture to future IBM Z and LinuxONE mainframe systems, creating the first dual-architecture processor from the partnership.
Mohamed Awad, Arm’s EVP of Cloud AI, explained that each processor core will natively execute both IBM and Arm instructions. This allows Arm-native Linux environments to run alongside z/OS and existing Linux applications on the same hardware.
IBM Z and LinuxONE are enterprise server families built for high security, large-scale operations, and mission-critical workloads. Getting Arm architecture into that ecosystem is a meaningful expansion of Arm’s reach beyond its traditional markets.
The IBM news came on top of already building momentum around Arm’s new AGI CPU. The chip, designed for AI data centers, has already booked more than $2 billion in future orders.
This is a big deal because it marks Arm’s first self-designed data center chip after 35 years as a pure licensing business. Arm is co-developing the chip with Meta.
Investors had been pricing in some of this AI enthusiasm ahead of Nvidia’s earnings, which acted as a broader sentiment driver for the chip sector. When Nvidia results came in, some traders locked in gains, which created short-term volatility in ARM stock earlier in the week.
Raymond James raised its price target on ARM to $641 from $565 on Tuesday, keeping an Outperform rating in place. That gives the stock significant upside from current levels if the analyst’s thesis plays out.
The upgrade followed Arm’s stronger-than-expected first-quarter results in late July. The company reported earnings of 45 cents per share against a 40-cent consensus estimate. Revenue came in at $1.29 billion, topping the $1.26 billion forecast.
ARM’s 12-month gain now stands at 79%. The stock has a 52-week range of $100.02 to $452.61, and is currently trading at about 43% of that range.
The market cap sits at roughly $268 billion. The RSI reading of 43.79 suggests the stock is not in overbought territory despite the recent run.
One risk worth watching is smartphone demand. A weaker device market can drag on Arm’s royalty income since fewer chips shipping means less revenue from its licensing model.
Raymond James’ revised $641 price target remains the most recent analyst move on the stock.
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