Arm Holdings (NasdaqGS:ARM): Evaluating Valuation After Recent Share Price Pullback

Arm Holdings (ARM) shares showed a minor gain last session, closing at $136.99. The stock continues to trade well below its highs from the past month. Investors watching recent market activity may wonder if this is setting the stage for future moves as the chip designer navigates ongoing industry shifts.

See our latest analysis for Arm Holdings.

After a sharp rally earlier this year, Arm Holdings has seen momentum fade in recent weeks, with a 20.1% decline in its 1-month share price return dampening some of the earlier enthusiasm. Despite that pullback, the year-to-date share price return remains positive at 6.9%, and total shareholder return over the past year rests just above break-even. This highlights how quickly sentiment can shift for high-profile chip stocks as growth expectations and risk appetite fluctuate.

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With shares down from recent highs, but backed by double-digit sales and profit growth, investors must now ask themselves if Arm Holdings is trading at a discount or if the market has already accounted for future gains.

Most Popular Narrative: 95.7% Overvalued

With Arm Holdings closing at $136.99 and the most widely followed narrative estimating fair value near $70, the gap is striking. According to jaikhom, current prices are heavily shaped by speculative momentum rather than fundamental drivers, setting the stage for potential wild swings ahead.

ARM Holdings continues to benefit from its irreplaceable role in the global semiconductor ecosystem, powering everything from smartphones to AI edge devices. Based on a forward earnings framework anchored to the 10-year U.S. Treasury yield, the stock’s intrinsic fair value is estimated at $70 per share. Applying a prudent 20% discount to reflect interest rate risk and macro uncertainty yields a conservative, risk-adjusted target of $56. However, recent market action suggests investor sentiment has shifted decisively beyond fundamentals. With ARM now trading in the $120, $140 range, its implied earnings yield has fallen below that of the 10-year Treasury, a classic hallmark of speculative enthusiasm. This divergence marks what we define as the “bubble wave,” a phase where momentum, narrative, and liquidity begin to dominate valuation discipline.

Read the complete narrative.

Ever wondered what powers a call for nearly a 50% drop from today’s price? Hint: It’s not just earnings forecasts or sector hype. The full narrative reveals bold quantitative assumptions and provocative logic that flips conventional pricing on its head. You’ll want to see what’s driving these numbers.

Result: Fair Value of $70 (OVERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts.

However, if AI tailwinds strengthen or rate cuts arrive sooner than expected, the current overvaluation thesis could quickly be put to the test.

Find out about the key risks to this Arm Holdings narrative.

Build Your Own Arm Holdings Narrative

If you’re curious to see the numbers for yourself or want to dig deeper before accepting these views, you can quickly build your own perspective using Do it your way.

A good starting point is our analysis highlighting 2 key rewards investors are optimistic about regarding Arm Holdings.

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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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