Arm Holdings, a British semiconductor and software design company, has been making significant moves in the stock market recently. Let’s explore the reasons behind this meteoric rise:

1. Positive Commentary from NVIDIA:Arm’s stock rose after NVIDIA provided favorable commentary about its Grace CPUs during a recent conference call.
   NVIDIA expressed bullishness about its Arm-based CPU chips, particularly Grace-Hopper, which combines Hopper H100 GPUs with Arm-based CPUs.
   The third quarter marked the first time NVIDIA received revenue from Grace-Hopper, and the company expects it to become a multibillion-dollar product line.
   

2. Initiation at Outperform:Earlier this week, Wells Fargo analysts initiated coverage on Arm with an “Outperform” rating and set a price target of $70.
   This positive sentiment contributed to the stock’s rally.
   

3. Expanding Markets and Royalty Strength:Arm announced that it could charge twice as much for its latest instruction set, accounting for 15% of its royalties.
   The company’s expansion into new markets, such as cloud servers and automotive, driven by AI demand, has further boosted investor confidence.
   Despite having a higher earnings multiple than NVIDIA or AMD, Arm’s optimistic growth forecast has made it the latest AI darling among investors.
   

4. Lockup Expiration:Next month, a 180-day lockup period will expire, potentially providing more clarity on Arm’s value.
   SoftBank, which still owns 90% of Arm’s outstanding stock, has seen its stake increase significantly since Arm’s last financial report1.
   

In summary, Arm’s architecture, coupled with its strong position in AI and expanding markets, has fueled its remarkable stock performance. However, investors should closely monitor developments as the lockup period ends.