Arm Holdings (ARM) Is Down 5.5% After Nvidia NVLink Deal for Neoverse Platform Integration - Has The Bull Case Changed?

• Arm Holdings announced it will incorporate Nvidia's NVLink Fusion technology into its Neoverse platform to boost AI data center performance and simplify integration for major cloud providers.
• This partnership is expected to accelerate the adoption of specialized AI infrastructure, positioning Arm for increased influence among top hyperscalers such as Amazon, Microsoft, Google, and Meta.
• We’ll now explore how embedding Nvidia’s high-speed interconnect into Neoverse could shift Arm Holdings’ long-term AI growth outlook.

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Arm Holdings Investment Narrative Recap

To be a shareholder in Arm Holdings, you need to believe in the company's ability to capture growing demand for AI-driven data center infrastructure, leveraging its Neoverse platform with major hyperscalers. The recent integration of Nvidia's NVLink Fusion strengthens Arm's short-term catalyst: accelerating market share in AI data centers. However, this does not meaningfully diminish the largest current risk, Arm's dependence on flagship smartphones and concentrated relationships with hyperscalers, which could limit revenue growth if diversification lags.

Among recent announcements, Arm's collaboration with Astera Labs stands out, focusing on lowering barriers for custom SoC development in AI infrastructure. This move runs parallel to the Nvidia partnership, as both initiatives seek to enhance Arm's relevance in AI-centric compute markets, a key driver for future royalty and earnings growth given hyperscaler adoption trends.

On the flip side, investors should also be mindful of how growing vertical integration by hyperscalers could shrink Arm’s addressable customer base and threaten long-term royalty streams...

Read the full narrative on Arm Holdings (it's free!)

Arm Holdings' narrative projects $7.4 billion in revenue and $2.3 billion in earnings by 2028. This requires 21.5% yearly revenue growth and a $1.6 billion earnings increase from the current earnings of $699.0 million.

Uncover how Arm Holdings' forecasts yield a $166.72 fair value, a 26% upside to its current price.

Exploring Other Perspectives

Some analysts are even more optimistic, predicting Arm's annual revenue could hit US$8.6 billion and earnings reach US$2.8 billion by 2028. These high-end estimates assume Arm’s share of the hyperscaler data center market will rise far beyond consensus. This highlights how opinions can differ, so be sure to consider all sides before you decide where you stand.

Explore 17 other fair value estimates on Arm Holdings - why the stock might be worth less than half the current price!

Build Your Own Arm Holdings Narrative

Disagree with existing narratives? Create your own in under 3 minutes - extraordinary investment returns rarely come from following the herd.

• A great starting point for your Arm Holdings research is our analysis highlighting 2 key rewards that could impact your investment decision.
• Our free Arm Holdings research report provides a comprehensive fundamental analysis summarized in a single visual - the Snowflake - making it easy to evaluate Arm Holdings' overall financial health at a glance.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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