ARM stock skyrockets 12% after unveiling first in-house AI chip

Shares of Arm Holdings surged in premarket trading on Wednesday after the company unveiled its first internally developed chip and outlined ambitious long-term revenue targets.

The stock was up about 12.6% in premarket trading, reversing a 1.4% decline in the previous session.

The British semiconductor and software design firm introduced its AGI CPU at an event in San Francisco on Tuesday.

The processor is designed for artificial intelligence inference workloads in data centres as agentic AI applications expand, an area seeing rising demand with the expansion of agentic AI applications.

Chief Executive Rene Haas said the new chip alone is expected to generate $15 billion in revenue by 2031.

He added that the company is targeting total annual revenue of $25 billion and earnings per share of $9 over the same period.

The projection represents a sharp increase from the roughly $4 billion in revenue Arm generated in 2025, underscoring the scale of its ambitions in the AI infrastructure market.

Meta has emerged as the first confirmed customer for the AGI CPU, as it continues to invest heavily in data centre infrastructure and artificial intelligence.

Other early adopters include, OpenAI, Cloudflare, and SAP, highlighting early traction among enterprise and cloud players.

Strategic shift beyond licensing

For decades, Arm has operated a licensing-based business model, providing chip designs and collecting royalties from partners that manufacture processors using its architecture.

With the launch of its own chip, the company is now moving into direct competition with several of its key customers, including Amazon, Microsoft, Nvidia, and Google.

The move represents a fundamental shift in Arm’s strategy as it seeks to capture a larger share of the value chain in AI computing.

Analysts at Citi described the announcement as the “most significant shift in the company’s history.”

They said that while Arm’s move into chip manufacturing had been anticipated, the combination of a fully developed server CPU, backing from major customers such as Meta and OpenAI, and the scale of the revenue guidance surprised the market.

“Arm’s forecasts are well above even the highest of speculated estimates,” Citi analysts wrote, adding that the projected revenue could translate into substantial incremental profit and cash flow, easing concerns about potential pressure on margins from the strategic shift.

Bullish calls from Wall Street

Arm stock was upgraded by Raymond James from “Market Perform” to “Outperform,” with a price target of $166.

Analyst Simon Leopold said the upgrade reflects Arm’s decision to begin producing its own chips, a strategy he had previously supported when initiating coverage.

He noted that the shift could drive stronger operating profit, support growth, and add a new strategic dimension.

Separately, HSBC upgraded the stock to Buy from Reduce last week and more than doubled its price target to $205 from $90, marking one of the most optimistic outlooks on Wall Street.

Analyst Frank Lee said Arm is transitioning from a smartphone-dependent licensing model to a central player in AI server processors, a shift that could unlock significant upside.

Lee added that royalties from server CPUs could eventually match the company’s current total revenue, potentially reaching $4 billion by 2030.

He also noted that success in the merchant CPU market could allow Arm to increase pricing and improve profitability.