Home News Arm Stock in Focus After Reportedly Planning to Launch AI Chips

Arm Stock in Focus After Reportedly Planning to Launch AI Chips

by SuperiorInvest

Key takeaways

  • Arm shares will be in the spotlight on Monday after a report emerged on Sunday that the British chip designer plans to launch artificial intelligence chips in 2025.
  • The company reportedly plans to establish a new AI chip unit and build a prototype by spring next year before turning to contract manufacturers to mass produce the chips by fall 2025.
  • Arm shares are currently trading within a rising wedge, with a breakout leading to a possible test of $79, while a breakout could see the price rise to resistance around $145.

Shares of UK-based chip design giant Arm Holdings (ARM) will be in the spotlight on Monday after Asian Nikkeis reported on Sunday that the company plans to develop artificial intelligence (AI) chips, with the goal of launching its first type in early 2025.

According to the report, Arm, in which Japan's SoftBank (SFTBY) owns a 90% stake, will establish a new AI chip unit and build a prototype by spring next year before turning to contract manufacturers to produce the chips. en masse by autumn 2025.

Arm will finance the majority of the initial development costs, which are expected to be billions of yen, with Softbank also contributing, according to the report. Once up and running, the AI ​​chip business could be spun off under SoftBank.

The Japanese financial giant has already started negotiations with Taiwan Semiconductor Manufacturing (TSM) and other chip manufacturers to secure its production capacity. Asian Nikkeis reported.

Arm continues to move into lucrative data center market

Arm, which makes money by selling royalties on its chip designs, has continued its push into the lucrative AI data center market, where tech giants such as Microsoft (MSFT), Meta (META), Alphabet (GOOGL) and Amazon (AMZN) ) have announced plans to build their own in-house chips to power their AI computing needs, helping to reduce their dependence on giant AI chip supplier Nvidia (NVDA).

Since going public in September last year, the company's shares have more than doubled from their initial public offering (IPO) price of $51, as investors place bets that the chip designer can capture a considerable portion of the AI ​​infrastructure market. Canada's Precedence Research expects the AI ​​chip market to grow from $30 billion this year to $200 billion in 2032.

Monitor these levels amid a rising wedge breakout

Arm's share price has traded within a tight rising wedge since mid-April, a chart pattern that technical analysts often interpret as a bearish bias because it indicates a decline in buying momentum. In the short term, price may continue to swing in the wedge until the downward-sloping 50-day moving average reaches the pattern's upper trendline before the stock makes its next significant move.

Amid a move lower, investors should keep an eye on the $79 level, an area where the price may find buyers near the pre-February breakout level. However, if the price rises above the wedge, it is worth keeping in mind that the stock could make another attempt to test the key overhead resistance near the previous price action around $145.

Arm shares closed last week at $108.84, after gaining 5.1% during Friday's session.

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As of the date of writing this article, the author does not hold any of the above securities.

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