Arm Holdings Wants 50% Of The AI Data Center, Can It?

Summary

• ARM's management aspires to capture 50% of the data center CPU market by year-end, but current growth metrics don't fully support this target.
• Recent wins with hyperscalers like AWS, Nvidia, Google, and Microsoft highlight ARM's expanding presence in data center CPUs and strong performance benefits.
• Despite robust revenue and contract growth, ARM's stock has surged ahead of fundamentals, trading at a high EV/EBITDA multiple with limited near-term upside.
• Given ambitious targets, valuation expansion, and macro uncertainties, I reiterate my Hold rating on ARM Holdings until growth better aligns with expectations.

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Investment Thesis

Cambridge, UK-based Arm Holdings (ARM) is literally shooting for the stars in the AI data center market, at least the CPU side of it.

GPUs/XPUs typically attract all the attention when talking about

Analyst’s Disclosure:I/we have a beneficial long position in the shares of AMD either through stock ownership, options, or other derivatives. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.