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US-listed shares of Arm Holdings, the chip design firm owned by SoftBank, witnessed strong buying interest from the opening bell on Wall Street, surging 19% to hit a 3-month high of $157.80 apiece on the Nasdaq as investors cheered the company's announcement that it will sell its own chips for the first time.

Arm on Tuesday unveiled its first-ever data centre CPU, which has already entered the customer sampling stage, with production slated for later this year. The move is significant as it puts Arm in direct competition with some of its key customers, including Nvidia, Amazon, Alphabet, and Microsoft.

Meta, OpenAI, and smaller players such as Cloudflare have pledged to be among the first to deploy the chip, dubbed the Arm AGI CPU. The product will feature up to 136 cores — a key measure of processing power — and consume around 300 watts of electricity, Bloomberg reported.

The chips are being co-developed with Taiwan Semiconductor Manufacturing Co. This marks a strategic shift for Arm, which has traditionally relied on licensing its designs to companies such as Nvidia and Qualcomm, earning royalties based on unit sales.

As part of this transition, Arm has outlined aggressive sales targets for the coming years. It expects revenue from its new chip business to surpass that of its existing operations, which primarily focus on intellectual property licensing.

Shares initially fell following the announcement but rebounded after the closing bell on Tuesday once the company detailed its ambitious growth outlook.

Arm expects total revenue to reach roughly $25 billion within five years, nearly five times its current levels. Its IP licensing business is also projected to grow, reaching about $10 billion over the same period.

Shares of SoftBank Group Corp., which holds a majority stake in Arm, rose 7.9% in Tokyo. Arm’s stock performance plays a crucial role in supporting SoftBank’s ability to fund Chief Executive Officer Masayoshi Son’s investments in OpenAI and data centres, the report said.

For decades, Arm operated as a blueprint designer, licensing its intellectual property to chip manufacturers in return for royalties. The company traditionally focused on designing architectures rather than manufacturing chips, enabling clients to save years of engineering time while allowing Arm to command higher royalty rates.

It got into data centre chips in 2018 with the launch of its Neoverse platform.

Despite heightened volatility in US markets throughout March amid ongoing Middle East tensions, Arm Holdings shares have outperformed. The stock has gained 22.4% so far this month, building on a 21% rise in February, taking its year-to-date gains to around 42%.

Arm debuted on the Nasdaq in September 2023 at $56.10 per share, above its issue price of $50. At current levels, the stock is trading about 214% higher than its IPO price.

(With inputs from Bloomberg)

Disclaimer: We advise investors to check with certified experts before making any investment decisions.Ksheera Sagar has been working as a Market Research Analyst at LiveMint for the past four years, covering stocks, commodities, and broader financial markets. In this role, he closely tracks daily market movements, corporate earnings, sector trends, and macroeconomic developments.

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