Arm sparked a rally in processor stocks after predicting that a new data-center chip focused on agentic Artificial Intelligence would become a significant business. Shares of the SoftBank Group-controlled company jumped as investors responded to expectations that the product could expand Arm beyond its traditional licensing model and deepen its role in server hardware.
Arm expects the data-center chip to generate roughly 15 billion in annual revenue in about five years, CEO Rene Haas said in an interview with Reuters. Shares of the company soared 20% to their highest since November, while rivals Intel and Advanced Micro Devices also advanced more than 5% each. Arm stock was last at 162.10 in morning trading, and poised to add more than 29 billion to its market value.
The move highlights how rising use of Artificial Intelligence technology that can create apps, write computer code and finish presentations with little human intervention is increasingly benefiting CPU makers. Gains from the Artificial Intelligence boom had so far largely gone to Nvidia, whose graphics processors are needed for training Artificial Intelligence, though Nvidia earlier this month also unveiled its own CPU chip for Artificial Intelligence.
Arm’s new AGI CPU marks a strategic shift for a company that has traditionally licensed designs to companies such as Nvidia and Qualcomm and collected royalties based on unit sales. Unlike chips designed mainly to respond to chatbot queries, Arm said its processor will handle the data-crunching requirements of agentic Artificial Intelligence. Citigroup analysts said the move showed Arm had committed fully to building a highly performing and energy efficient Arm AGI CPU, while the industry’s shift to inference, particularly agentic Artificial Intelligence, was increasing demand for more CPUs.
HSBC analysts forecast that the combination of AGI CPU revenue and server CPU royalties will make fiscal year 2029 “the transitionary period where server CPUs take over smartphones as the dominant contributor” to Arm’s overall revenue mix. Arm is trading at 63.08 times analysts’ estimates for the company’s earnings for the next 12 months, compared with AMD’s 26.64 and Intel’s 71.27, according to data compiled by LSEG.
