Arm Holdings Stock is Way Up After Being Called a ‘Top Pick’ Amid AI Demand

Key Takeaways

• Arm Holdings was awarded its latest “Top Pick” rating by Morgan Stanley, which cited demand for the chip designer’s artificial intelligence (AI) products.
• The Morgan Stanley analysts pointed to Arm’s part in the technology industry shift to edge AI.
• Morgan Stanley has an “overweight” rating on Arm’s U.S.-traded shares, with a $175 price target.
• Arm’s stock soared Wednesday after the release of the report.

Arm Holdings (ARM) shares jumped Wednesday after Morgan Stanley analysts named the chip designer “Our New Top Pick” because of its reach into artificial intelligence (AI) products.

The analysts wrote Wednesday that they see Arm “as an important part to the shift to edge AI,” which is the use of AI data closer to its source, rather than centrally located in a cloud computing facility or data center. The Morgan Stanley research report pointed to this week’s launch of the Apple (AAPL) iPhone 16 and Arm’s architecture used in the phone’s A18 processor.

The analysts called the company their “favored play” on the emerging edge AI technology, adding that they expect mobile devices will fuel the initial upside for this deployment of AI, followed by infrastructure and autos.

Arm’s Key Growth Drivers

They also noted that Arm’s key growth drivers include increased use of the company’s v9 central processing unit (CPU) designs, more custom silicon demand, and greater use of CPU extensions.

Morgan Stanley rates the stock as “overweight,” with a price target of $175, which is more than 25% above its current level.

Arm Holdings American depositary receipts (ADRs), which have nearly doubled in value so far this year. Wednesday, were up 8.8% at $138.40 with about half an hour left in Wednesday’s session

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