US-listed shares of chip designer Arm Holdings continued to chug upwards on Thursday after chip giant Nvidia disclosed it had acquired a $147.3 million stake in the SoftBank-backed firm.
Arm’s shares on Nasdaq jumped more than 5% during US trade, extending a dream run that has led the chip firm to nearly double its market cap to $137 billion this month.
Shares of Arm dipped nearly 0.5% in early trade but quickly surged once news of Nvidia’s stake emerged.
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Nvidia disclosed its stakes as of December 31 in a 13F filing late on Wednesday. The third most-valuable US firm disclosed stakes in firms from a range of industries, including biotech, autonomous driving and other AI-based technologies.
Its largest investment, however, was in Arm Holdings.
The US chipmaking giant, and a market leader in cutting-edge AI chips, had failed to buy Arm in 2020 after the $80 billion deal hit the antitrust hurdle two years ago.
Last year, Nvidia also indicated interest in purchasing shares of Arm during its debut in US markets.
‘Once-in-a decade momentum’
Nvidia’s disclosure on Thursday came as cherry on the cake for Arm, which has seen its US-listed shares surge more than 95% in just the last seven trading sessions alone.
Much of the gains in Arm’s shares have come on the back of the a continuing AI frenzy, with investors lapping up the stock as another way to bet on the technology.
A better than expected quarterly sales and profit forecast — released last week — was the initial catalyst for the up-move.
The company’s executives said customers were flocking to Arm-based central processors to complement Nvidia’s chips for AI work in data centres, and working on new laptops and smartphones that can handle chatbots and other AI features.
Designing new chips for artificial intelligence work would generate higher royalties for Arm.
Those projections sent the company’s shares soaring by over 50% last Thursday. Frenzy around the stock continued as investors hunted for the ‘next Nvidia,’ one analyst noted.
Meanwhile, a scarcity in shares and a potential short squeeze gave Arm’s share price an added pivot, CNBC noted.
The conditions created a “once-in-a-decade momentum” for Arm, Mehdi Hosseini, an equity research analyst told CNBC.
Breather for SoftBank
Now trading at $133.68, Arm has nearly tripled from the $51 price set in its September initial public offering.
That would make the company one of the most successful investments after Alibaba for Japan’s SoftBank, which has seen much of its money flushed down an array of loss-making tech investments.
Last year, SoftBank reported about $7.2 billion in annual losses for the fiscal ending March 31, 2023. Its technology-focused investment fund posted a record loss of $32 billion.
Those failed stakes, along with China’s crackdown on its technology sector — where a lot of SoftBank investments were parked, proved to be a drag on SoftBank’s shares since early 2021.
But Arm’s soaring shares have also managed to bring some respite to investors in the Masayoshi Son-headed conglomerate.
SoftBank’s Tokyo-listed shares have soared nearly 30% since the up-move in Arm began — a move that has coincided with overall strength in Japanese equities.
Though the stock pared some gains on Friday, it still remains at its highest level since May 2021.
- Vishakha Saxena, with Reuters
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