$ARM for recovery on Thursday ?
Mid-week Rally.
On Wed, 05 Feb 2025, US stocks rallied, pushing the major averages higher for the 2nd day in a row.
This as investors looked past the trade turmoil that weighed on the market earlier in the week.
The gains came even as tech giants $Alphabet(GOOG)$ and $Advanced Micro Devices(AMD)$ fell by more than -7%, following weak earnings results out after Tues, 04 Feb 2025 market closing.
Google’s coming up short on (a) its topline and (b) cloud revenue (see above), even as it earmarked a higher-than-expected $75 billion AI investment buildout (in 2025) - see below, definitely spooked investors who worried that the Megacap company will take longer to capitalize on its AI ambitions.
Similarly, AMD’s fell after CEO, Lisa Su’s commented that AMD’s current-quarter data center sales - proxy for its AI revenue - would drop about -7% QoQ. And just like that AMD ended the day at its lowest since November 2023.
By the time market closed mid-week:
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DJIA : +0.71% (+317.24 to 44,873.28). The index’s gains were led by a sharp advance in Nvidia.
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S&P 500 : +0.39% (+23.60 to 6,061.48).
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Nasdaq : +0.19% (+38.32 to 19,692.33).
On the NY Stock exchange, advancing issues outnumbered decliners by a 2.74-to-1 ratio, with 169 new highs and 46 new lows.
On the Nasdaq, 2,935 stocks rose and 1,422 fell as advancing issues outnumbered decliners by a 2.06-to-1 ratio.
Wednesday’s trading volume on US exchanges was 13.85 billion shares, compared with 15.32 billion average for the full session over the last 20 trading days.
VIX Index.
Consistent with US market’s gains, the Cboe Volatility Index (VIX), also known as Wall Street's fear gauge, dropped -7.9% on Wednesday to 15.85.
ADP Jobs Report.
Wed, 05 Feb 2025 also saw the 2nd Jobs report published - ADP employment report.
In January 2025, US companies created a net 183,000 jobs on the month vs analysts’ expectations of 148,000 and slightly more than the +44.26% upwardly revised 176,000 jobs (for December 2024).
January data supports a stable labour market, giving the Fed time to decide its next policy move.
Further Probe.
Although headline ADP number topped expectations, the details revealed an unbalanced picture:
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All of the job creation came from service providers, that added the 190,000 positions.
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All the while, goods producers lost -6,000 positions.
In summary:
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Consumer-facing industries drove hiring / expansion in January 2025.
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Business services and Production (manufacturing) experienced contractions.
With the ADP jobs report released in the morning before market opens, it could possibly be one of the catalysts that pushed US market along.
ARMS Quarterly Earnings.
Wednesday also saw $ARM Holdings(ARM)$ released its quarterly results.
It’s been a while since I last covered the stock on 16 Sep 2023 (click here ! for details) - 2 days after the chip design company’s IPO on 14 Sep 2023, at $51 per share, raising $4.87 billion.
The IPO was the largest in the US since Rivian Automotive, Inc (RIVN)$'s offering in 2021.
It will be interesting to find out its quarterly earnings hot on the heels of DeepSeek’s big reveal towards end January 2025.
Chip-design giant ARM reported record quarterly sales on the back of a rush of artificial-intelligence chip buying but gave an outlook that disappointed investors, sending its shares down.
In a shareholder letter, Arm’s top executives said:
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AI was driving strong demand for Arm-based chips.
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It also cited new developments in hardware and small but powerful language models that make AI more viable on personal computers, smartphones and cars.
The company’s $983 million sales revenue in its latest quarter were better than the $939 million analysts expected in a FactSet survey.
It was its current quarter guidance of between $1.175 and $1.275 billion in revenue, that was about in line with an analyst projection of $1.221 billion, that disappointed market.
On Wed, 05 Feb 2025, it closed up +6.8% but all too soon, Arm’s shares fell more than -6% in after-hours trading. (see below)
ARM’s Advantages.
Arm’s basic circuit architecture is inside nearly all of the world’s smartphones.
And its technology has spread rapidly into other arenas in recent years.
Arm-based chips for (a) personal computers, (b) servers and (c) a wide variety of other electronic devices have proliferated.
Even $NVIDIA(NVDA)$, the leader in AI chips, is using an Arm-based central processing unit in some of its most powerful AI hardware.
With NVDA staging a recovery on Wednesday, will it be a similar recovery for ARM on Thursday ?
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Do you think ARM is a better investment than NVDA ?
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Do you think ARM is superior to $Taiwan Semiconductor Manufacturing(TSM)$, comparatively speaking ?
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