Shares of Arm Holdings continued to decline on Wednesday, extending losses after the semiconductor stock tumbled more than 10% in the previous session as investors rotated out of several high-flying artificial intelligence names.
Arm shares fell 4.7% to $349.03 and are down about 19% since the beginning of the week.
Despite the recent selloff, the stock remains one of the strongest performers in the semiconductor sector, having surged 227% this year and gained 127% over the past 12 months, according to Dow Jones Market Data.
The weakness in the stock comes amid a broader reassessment of valuations across AI-related companies.
However, Wall Street analysts remain optimistic about Arm’s long-term prospects and continue to raise their price targets on the chip designer.
Both UBS and TD Cowen increased their targets on the stock on Wednesday, arguing that Arm remains well positioned to benefit from the next phase of AI infrastructure spending.
Analysts see significant upside driven by CPUs and agentic AI
UBS raised its price target on Arm to $470 from $260 while maintaining a Buy rating on the stock.
The new target implies about 33% upside from Wednesday’s trading levels.
UBS analyst Timothy Arcuri said investor attention is increasingly centered on the revenue potential of Arm’s internally developed central processing units.
“The real investor debate, in our view, is revenue potential for Arm’s standalone CPU,” Arcuri wrote Wednesday.
The analyst team expects revenue from Arm’s internal CPUs to grow to around $14 billion by 2030.
According to the company, its internal chip business is not expected to become financially material until fiscal 2028.
“Arm’s core competency lies in latency and efficiency—which aligns well with hyperscaler needs,” Arcuri wrote.
TD Cowen also raised its price target to $475 from $265 and reiterated its Buy rating, implying roughly 35% upside from current levels.
The brokerage said the changing AI workloads are increasing the importance of central processing units.
“The Doing Behind The Thinking: As agentic AI shifts more work from the thinking GPUs do to the doing CPUs handle, CPUs are becoming an AI beneficiary,” the analyst stated.
TD Cowen added that Arm’s target of generating $15 billion in annualized AGI CPU revenue by fiscal 2031 appears reasonable, identifying GPU-to-CPU attachment rates and pricing per core as key factors influencing that outlook.
Internal chip ambitions reshape investment case
Arm has traditionally generated revenue by licensing its instruction-set architecture and collecting royalties from customers, including Apple, Nvidia, Samsung, and Qualcomm.
At its core, Arm develops the fundamental interface between CPU chips and software and serves as the principal alternative to the x86 architecture used by Intel and Advanced Micro Devices.
However, the company is increasingly moving beyond intellectual property licensing and into full-scale chip production, creating a new investment debate around the size of its future semiconductor business.
TD Cowen suggested the market may be applying a 15% share estimate too mechanically to Nvidia’s estimated $200 billion CPU total addressable market, while maintaining a more constructive view on Arm’s intellectual property opportunities.
Bank of America also raised its target on Arm earlier this week to $460 from $335 and reiterated its Neutral rating.
“We see Arm as one of the most prominent beneficiaries of the rising server CPU tide,” Bank of America analyst Vivek Arya wrote.
He added that Arm at $420 is “fairly valued.”
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