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ARM Skyrockets 17% in a Month: Should You Board the Train?
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Shares of Arm Holdings plc (ARM - Free Report) have surged 17% in the past month, handily outperforming the industry’s 4% gain.
Image Source: Zacks Investment Research
This strong rally raises a key question: can the momentum sustain, or is a cooldown imminent? Let’s unpack the drivers fueling ARM’s rise and the factors that could restrain it.
Mobile Market Leadership: Power-Efficient Chip Innovation
ARM’s dominance in mobile computing remains unmatched, anchored by its power-efficient chip architectures. These designs power energy-saving devices from Apple (AAPL - Free Report) , Qualcomm (QCOM - Free Report) , and Samsung, forming the foundation of modern mobile technology. As the demand for higher performance with lower energy consumption grows, ARM’s chips continue to lead in smartphones and tablets. Apple’s M-series chips, Qualcomm’s Snapdragon processors, and Samsung’s Exynos systems all rely on ARM’s architecture, a testament to its unrivaled blend of efficiency and performance. This synergy between innovation and practicality reinforces ARM’s enduring competitive edge.
Positioned for Growth: The AI and IoT Frontier
Beyond mobile, ARM is swiftly emerging as a vital enabler of AI and IoT advancements. As Apple, Qualcomm and Samsung double down on AI-centric innovation, ARM’s adaptable, energy-efficient designs are increasingly indispensable. Its chips power everything from wearables and automotive systems to cloud infrastructure and edge devices. Apple’s next-gen silicon integrates advanced AI features, Qualcomm is enhancing on-device intelligence, and Samsung is leveraging ARM-powered solutions for smarter IoT ecosystems. With machine learning and edge computing redefining the digital landscape, ARM’s architecture is becoming the backbone of the AI-driven future.
China Exposure: RISC-V Gains Momentum
However, ARM’s heavy dependence on China, its second-largest market, poses a growing concern. The rise of RISC-V, an open-source chip architecture gaining traction among Chinese firms, threatens ARM’s foothold. With Beijing expected to introduce formal policies promoting RISC-V adoption, the shift toward domestic alternatives could accelerate. This strategic pivot to reduce reliance on foreign technologies may weigh on ARM’s long-term growth prospects in the region. Investors should watch this trend closely, as increasing RISC-V adoption could gradually erode ARM’s market share in China.
Cautious Outlook: No Earnings Revisions
Over the past 60 days, analysts have made no revisions to ARM’s fiscal 2026 earnings estimates. This steady outlook signals caution — suggesting that while fundamentals remain intact, the near-term catalysts driving earnings acceleration are limited. The recent rally may already reflect optimism, leaving little room for upside surprises in the short run.
Image Source: Zacks Investment Research
Valuation Concerns: ARM Trades at a Premium to Peers
ARM stock is currently expensive. It is priced at around 87.51 times forward 12-month earnings per share, significantly higher than the industry’s average of 37.9 times. When looking at the trailing 12-month EV-to-EBITDA ratio, ARM is trading at around 138.33 times, far exceeding the industry’s average of 24.49 times.
Bottom Line
ARM’s leadership in mobile chips and its growing role in AI and IoT make it a technological powerhouse. However, rising competition from RISC-V, exposure to China and stretched valuations warrant prudence. While ARM’s long-term story remains compelling, investors may prefer to wait for a more reasonable entry point before boarding this fast-moving train.
Shares of Arm Holdings plc (ARM - Free Report) have surged 17% in the past month, handily outperforming the industry’s 4% gain.
This strong rally raises a key question: can the momentum sustain, or is a cooldown imminent? Let’s unpack the drivers fueling ARM’s rise and the factors that could restrain it.
Mobile Market Leadership: Power-Efficient Chip Innovation
ARM’s dominance in mobile computing remains unmatched, anchored by its power-efficient chip architectures. These designs power energy-saving devices from Apple (AAPL - Free Report) , Qualcomm (QCOM - Free Report) , and Samsung, forming the foundation of modern mobile technology. As the demand for higher performance with lower energy consumption grows, ARM’s chips continue to lead in smartphones and tablets. Apple’s M-series chips, Qualcomm’s Snapdragon processors, and Samsung’s Exynos systems all rely on ARM’s architecture, a testament to its unrivaled blend of efficiency and performance. This synergy between innovation and practicality reinforces ARM’s enduring competitive edge.
Positioned for Growth: The AI and IoT Frontier
Beyond mobile, ARM is swiftly emerging as a vital enabler of AI and IoT advancements. As Apple, Qualcomm and Samsung double down on AI-centric innovation, ARM’s adaptable, energy-efficient designs are increasingly indispensable. Its chips power everything from wearables and automotive systems to cloud infrastructure and edge devices. Apple’s next-gen silicon integrates advanced AI features, Qualcomm is enhancing on-device intelligence, and Samsung is leveraging ARM-powered solutions for smarter IoT ecosystems. With machine learning and edge computing redefining the digital landscape, ARM’s architecture is becoming the backbone of the AI-driven future.
China Exposure: RISC-V Gains Momentum
However, ARM’s heavy dependence on China, its second-largest market, poses a growing concern. The rise of RISC-V, an open-source chip architecture gaining traction among Chinese firms, threatens ARM’s foothold. With Beijing expected to introduce formal policies promoting RISC-V adoption, the shift toward domestic alternatives could accelerate. This strategic pivot to reduce reliance on foreign technologies may weigh on ARM’s long-term growth prospects in the region. Investors should watch this trend closely, as increasing RISC-V adoption could gradually erode ARM’s market share in China.
Cautious Outlook: No Earnings Revisions
Over the past 60 days, analysts have made no revisions to ARM’s fiscal 2026 earnings estimates. This steady outlook signals caution — suggesting that while fundamentals remain intact, the near-term catalysts driving earnings acceleration are limited. The recent rally may already reflect optimism, leaving little room for upside surprises in the short run.
Valuation Concerns: ARM Trades at a Premium to Peers
ARM stock is currently expensive. It is priced at around 87.51 times forward 12-month earnings per share, significantly higher than the industry’s average of 37.9 times. When looking at the trailing 12-month EV-to-EBITDA ratio, ARM is trading at around 138.33 times, far exceeding the industry’s average of 24.49 times.
Bottom Line
ARM’s leadership in mobile chips and its growing role in AI and IoT make it a technological powerhouse. However, rising competition from RISC-V, exposure to China and stretched valuations warrant prudence. While ARM’s long-term story remains compelling, investors may prefer to wait for a more reasonable entry point before boarding this fast-moving train.
ARM currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.