Tuesday Oct 24 2023 13:15
5 min
On Monday, Intel stock declined by 3% following a Reuters report that revealed Nvidia and AMD were collaborating on Arm-based PC chips. In contrast, UK chip designer Arm Holdings’ stock saw an increase of nearly 5%, and Nvidia shares gained almost 4% during late-day trading on the same day.
Intel currently holds the majority of the market share for PC chips, with AMD as the second-largest player. In the June quarter, sales of PC chips accounted for more than half of Intel's revenue.
Intel’s PC chips are rooted in the x86 instruction set, whereas Arm-based instruction set chips, often utilized in smartphones, are known for their significantly lower power consumption — a crucial factor for battery-powered devices.
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Apple recently transitioned from Intel to its own Arm processors for laptops and PCs, resulting in a short-term surge in sales and extended battery life for their devices.
According to Reuters reporters Stephen Nellis and Max Cherney, Santa Clara-based software company Nvidia is potentially set to introduce an Arm-based PC chip as early as 2025, and AMD is also planning to develop Arm-based chips for PCs, which will likely be intended for use in PCs running Microsoft Windows.
While adapting software from the x86 instruction set to be compatible with Arm-based processors can be a time-consuming and challenging process, Windows can already run smoothly on Arm chips.
Qualcomm has been working on its Arm-based PC chips for several years, although it has yet to gain significant sales traction. The company has a launch event scheduled for later this week.
In its recent initial public offering, Arm told investors that it has long-term agreements with major chip manufacturers to utilize its technology in their chips.
At the time of writing, Arm Holdings shares were trading at approximately $51.6 in premarket trading on Tuesday, close to the company's IPO price, which indicated a lack of upward momentum over the past three weeks. The Nvidia and AMD-related news may provide a boost to the shares, although it remains to be seen how investors react to the Reuters report in further trading this week.
Several companies that have gone public this year are facing challenges in the stock market. The most recent example is the IPO of German footwear company Birkenstock, which failed to live up to expectations. The German footwear company's stock ended its first day of trading with a 12.9% decline and dropped by 21% by the end of the week. In premarket trading on Tuesday, the stock was up 0.46%, but traded around $39 — well below its listing price of $46..
A similar situation has unfolded for Maplebear, the parent company of San Francisco-based grocery delivery firm Instacart. After its initial debut at $30 and a 12% surge on the first day of the Instacart IPO, Maplebear's stock has since decreased, trading at approximately the $25 mark.
Despite the challenges Arm and other recent IPOs have encountered, a number of prominent Wall Street brokerages have expressed optimism about the company's stock. These positive ratings, however, are yet to influence Arm Holdings’ share price.
Deutsche Bank has issued a Buy rating for the stock and set a price target of $60. Goldman Sachs, which established a price target of $62, anticipates that Arm will not only strengthen its presence in the smartphone market through increased royalty rates, but also expand into sectors where it currently has a limited presence.
Other brokerages, including Citi and TD Cowen, have set price targets within the range of $57 to $85, with the most optimistic outlook coming from Rosenblatt Securities.
On the contrary, some brokerages, such as HSBC, have advised caution, suggesting that Arm's shares may remain within a certain price range due to uncertainties surrounding the recovery of the smartphone market and its impact on earnings.
Currently, at least 23 brokerages are covering Arm's shares, according to TipRanks, with an average rating of "moderate buy" and a median price target of $62.24 — a potential upside of 24% from the last closing price of $50.21.
When considering shares for trading and price predictions, remember that trading CFDs involves a significant degree of risk and could result in capital loss.
Past performance is not indicative of any future results. This information is provided for informative purposes only and should not be construed to be investment advice.
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