Arm Holdings (NasdaqGS:ARM): Evaluating Valuation After Strong Meta Partnership and Record-Breaking Quarter

Arm Holdings (ARM) drew attention this week after announcing a partnership with Meta to improve AI efficiency. The company recently posted its strongest second quarter, reporting gains in both revenue and operating income.

See our latest analysis for Arm Holdings.

After a strong run earlier this year, Arm Holdings’ recent 30-day share price return of -25.76% has cooled some of the enthusiasm that previously surrounded its AI-driven story. Still, momentum remains intact over the longer term. The company is roughly flat on a total shareholder return basis for the past year as it continues to expand its reach into next-generation computing and attract major customers across the tech landscape.

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The question now is whether Arm’s surging AI potential offers investors an overlooked bargain, or if the remarkable growth already anticipated by the market means every bit of future upside is already priced in.

Most Popular Narrative: 89% Overvalued

Arm Holdings’ prevailing narrative suggests that the stock’s current price is far higher than even bullish long-term models imply. The latest close at $132.61 is well above the fair value estimate, setting up debate around the forces driving prices into uncharted territory.

With ARM now trading in the $120, $140 range, its implied earnings yield has fallen below that of the 10-year Treasury. This is 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.

Want to know what growth scenario could possibly support such a high target? This narrative hints at bold profit forecasts and market dynamics rarely seen outside Silicon Valley’s most dramatic stories. Discover the surprising foundation and tensions driving such a dramatic valuation call.

Result: Fair Value of $70 (OVERVALUED)

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

However, any rapid shift in interest rates or disappointing earnings could quickly curtail speculative momentum and trigger a sharp share price correction.

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

Build Your Own Arm Holdings Narrative

If you see things differently or want a deeper dive into the numbers, you can craft your own scenario in just a few minutes. 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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