Americans invented Beatlemania in 1964, which was bittersweet for the British, who had invented it in 1962. Something similar is happening now to Arm Holdings. The Cambridge-headquartered chip designer has doubled in value after posting quarterly results last week. Since its Nasdaq float in September, the stock is up 192 per cent. Its market cap at Monday’s close of $152.8bn would put it third by weight in the FTSE 100, ahead of HSBC and just behind Shell, if it were London listed, which it once was but now is not. The straightforward explanation for the move is that Arm’s auditioning to join the Magnificent Seven. AI gets 19 mentions in Arm’s third-quarter investor presentation and was the leitmotif of its conference call. Everyone who’s anyone in AI is an Arm licensee, including Nvidia, which in 2020 agreed to buy the company for $40bn then was forced by the FTC to abandon the plan. Arm’s an option if you’re looking for a name that’s at least tangential to all the themes A16z types blog about, like AI-optimised datacentres, AI acceleration, AI open standards, AI mixed computing, edge AI and custom AI inference. At least some of the $7tn that AI’s carnival barker Sam Altman says he’s raising would end up at 110 Fulbourn Road, Cambridge, and even a small percentage of $7tn is still a big number. To those of us who were writing about Arm before the dotcom bubble, there’s a lot here that’s familiar. There’s also a lot around that can encourage hope built on misunderstanding, such as this quote from analyst Dylan Patel of SemiAnalysis: Patel says [Arm] has a huge amount of room to increase the royalty rates it charges device makers that use its chip designs. He notes Arm charges phonemakers something on the order of 50 cents a phone for its mobile CPU designs. Qualcomm’s royalties for using its radio chips in a high-end phone might run something like $13. Every management meeting between Arm’s London float in 1998 and its purchase by SoftBank in 2016 had a section on royalty rates. The gist was that even though Arm had a 100 per cent monopoly in areas like smartphone CPUs, ubiquity did not mean pricing power.
Full commentary : Riding the AI wave, UK chip designer Arm sees shares almost double.
