As of August 20, 2025, Arm Holdings plc is trading at approximately $134 per share. The stock is down sharply on the heels of cautious guidance and increased R&D spend, even though it delivered 12% revenue growth. Technicians see a bear flag pattern with key support around 130, increasing the risk of further falls. But technical indicators, like the RSI reading below 30, are signaling that the arm stock may be oversold and due for a bounce.
The Bold “Chip Pivot” Strategy
Under CEO René Haas, Arm is transitioning away from its traditional licensing model and moving towards comprehensive chip design, with a particular focus on artificial intelligence and server processors. The hiring of Amazon’s AI-chip guru Rami Sinno underscores this ambition. With smartphone royalties still strong, roughly 25% year-over-year, Arm is powering ahead into the lucrative market for data center CPUs, aiming to claim up to 50% share by year-end.
Financial Pressure and Growing Costs
Arm’s ambition is grand, but implementation has been expensive. R&D expense surged nearly 20% in Q1, pressuring margins even as revenue was growing. That’s a dangerous mix when combined with sky-high costs and modest earnings guidance, and the result was a 13% post-earnings drop in the stock. Investors now must weigh short-term volatility against the potential for long-term innovation.
Rising Competition and Market Outlook
Nvidia is also a looming rival, with plans to release Arm-based PCs in September 2025. Arm, for its part, is focusing bets on energy efficiency. The 200-strong engineering team the company has added in the past year and a half, working on AI, suggests a commitment to the long view of innovation as well. Yet, this aggressive co-design approach may ruffle feathers with ARM’s licensing customers.
Valuation and Investor Confidence
With an 80x forward P/E ratio, Arm is already very expensive relative to peers. But institutional investors are bullish: later in Q2, Bridgewater Associates added $76.6 million, as Vanguard keeps loading up. Analysts have an average price target of $165, and some predict the stock could test $194 if AI adoption accelerated.
