Arm Holdings Shares Extend Blistering Rally in Wake of Earnings

Jeran Wittenstein, Bloomberg News

, Bloomberg

(Bloomberg) -- Arm Holdings Plc soared again on Monday, extending a three-day rally that has driven its value up almost 100%, after a blockbuster earnings report last week showed artificial intelligence spending is bolstering sales.

The chip designer’s shares rose 29% on Monday to close at a record on volume that was more than 10 times the average over the past three months. The advance pushed the stock’s gains to more than 90% in the three trading sessions since Arm’s results were released after markets closed on Feb. 7.

“What you’re seeing here is a feeding frenzy for anything to do with AI,” said Dennis Dick, trader at Triple D Trading. “Algos are getting involved, retail traders are getting involved, people are buying options. All that is just snowballing.”

Arm is benefiting from a push beyond smartphone technology, helping fuel growth and profitability. Last week, the company projected revenue of $850 million to $900 million for the March quarter, far surpassing the average analyst estimate at $778 million. Chief Executive Officer Rene Haas said opportunities presented by AI are still in the early stages.

The enthusiasm for the shares produced some noteworthy trading activity, with much of the gains arriving in just a few hours of trading. The shares topped out at nearly $127 within the first 36 minutes of trading on Feb. 8, and the latest session saw the bulk of the rally concentrated within the first 108 minutes of the day.

There’s some expectation that this advance could continue, with traders continuing to pay up for options, especially short-term calls protecting against further share gains. The most actively traded option was the $185 call expiring Friday, with more than 54,000 contracts changing hands. It traded last around $6 each. Based on the stock closing at $148.97, shares would need to gain another 28% by the end of the week for the contract be worth something at expiry.

So far, Nvidia Corp. has been the biggest beneficiary of AI-driven demand for computing power. The chipmaker’s shares more than tripled last year amid a surge in revenue and profits related to sales of its so-called AI accelerator chips. Nvidia’s rally has continued this year, sending the stock up another 46% and briefly pushing its market value past that of Amazon.com Inc.

Arm and Nvidia were once destined to merge as part of a $40 billion deal announced in September 2020, but they ultimately dropped the plans. The merger faced opposition from the start with Arm’s own customers scorning the idea and regulators vowing to give it close scrutiny.

Arm has nearly tripled since its shares debuted in September and now has a market value of more than $150 billion, making it more valuable than Boeing Co. and AT&T Inc. The Cambridge, England-based company is still 90%-owned by SoftBank Group Corp., which acquired the business in 2016 for $32 billion.

“We’re getting to a point where it is moving parabolic, and that means serious market cap is being put in, because this was a fairly large company to begin with,” Dick said.

--With assistance from Ian King, Ryan Vlastelica and David Marino.