Shares of ARM Holdings Ltd (NASDAQ: ARM) plummeted by 6.83% during intraday trading on Monday, as concerns over the company's lofty valuation overshadowed the optimism surrounding its potential in the artificial intelligence (AI) market.
The semiconductor design company, which licenses its chip architecture to major tech giants, has seen its stock price soar in recent months, fueled by the growing hype around AI and its potential applications. However, some analysts have raised concerns that ARM's valuation has become stretched, even when factoring in optimistic assumptions about its future growth and profitability.
In a research note, analysts at Seeking Alpha argued that even with aggressive projections for revenue growth and margin expansion, ARM's intrinsic value stands at around $67 per share, significantly lower than its current trading price. The analysts cited the company's business model, which relies on fixed-fee contracts and declining royalty rates, as a potential limitation to its ability to fully capitalize on the AI boom.
The broader sell-off in semiconductor stocks, with companies like Nvidia (NVDA) and Broadcom (AVGO) also experiencing declines, further exacerbated the pressure on ARM's shares.
Comments