Arm Holdings Faces Investor Disappointment Amid Strategic Shift
Arm Holdings shares plunged nearly 13% as the company's pivot to in-house chip development prompted investor concern over future profit margins. The move, seen as conflicting with Arm's traditional licensing model, comes as the firm grapples with global trade tensions impacting demand in the smartphone market.
Arm Holdings witnessed a significant drop in its share prices, declining nearly 13% in early trading this Thursday. The decline follows the tech company's announcement of a strategic pivot towards investing in its own chip development, a decision that did not sit well with investors worried about future profit impacts.
Traditionally known for licensing intellectual property to tech giants like Nvidia and Amazon, Arm's new strategy positions it in direct competition with its clientele. J.P. Morgan analyst Harlan Sur expressed concerns about potential conflicts of interest and the company's broader focus on system-level, software, and AI initiatives.
Additionally, Arm's fiscal second-quarter profit forecast slightly underperformed Wall Street predictions, reflecting the impact of escalating trade tensions on the smartphone market. The stock, which had seen a robust rise since its market debut, now trades at over 80 times expected earnings, with brokerages divided on future price targets.
(With inputs from agencies.)
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