Arm Holdings shares had been riding a wave of enthusiasm over the company’s budding semiconductor efforts, but now investors are getting worried that Arm may not play a role in a rival’s potentially major chip venture.
Shares of Arm Holdings closed down 8% on Monday, snapping a seven-day winning streak and posting their largest decline since October, according to Dow Jones Market Data. The stock also paced Nasdaq-100 decliners on the day.
Benchmark analyst Cody Acree told MarketWatch that the decline is “definitely” related to a report on X from TF International Securities analyst Ming-Chi Kuo, who said that Qualcomm is working with OpenAI to develop smartphone chips.
While the report isn’t confirmed, investors seem nervous about the unknowns, such as whether the chip design would be Arm-based or if it won’t involve the company at all.
Arm and Qualcomm did not immediately respond to requests for comment.
Arm’s Monday selloff also dovetails with what Acree called a “broad-based correction” among “AI-levered companies.” Shares of Broadcom, Marvell Technology, Advanced Micro Devices, Lumentum Holdings and Coherent all posted declines between 1% and 5% on Monday.
Meanwhile, shares of Credo Technology Group Holding fell over 7% and MaxLinear’s stock fell over 14%.
Arm’s stock surged 19% in March and another 43% in April, partly reflecting excitement over the company’s announcement that it would develop its own central processing unit, a move that allows the company to expand its business beyond licensing and royalties for chip designs. A number of analysts upgraded the stock in recent months.
Susquehanna analyst Christopher Rolland wrote in a Friday note that Arm’s move to diversify its business beyond designing processors for smartphones, in addition to its CPU opportunities, bode well for the stock. He also believes that the company could capitalize on cloud trends and the automotive market.
Some analysts still have reservations over the stock. Morgan Stanley’s Lee Simpson downgraded the stock earlier this month, saying that a major shortage of dynamic random-access memory chips could hurt the company’s royalty business.
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