Arm Holdings (ARM)'s fourth-quarter results were strong, with sales up 14% to $824 million, and the company's stock hit an all-time high as both revenue and revenue exceeded Wall Street expectations. has soared. The company also released its first-quarter guidance, expecting a 38% revenue increase at the midpoint of its range.
Patrick Moorhead, founder, CEO and chief analyst at Moor Insights & Strategy, joins Yahoo Finance to discuss Arm's explosive profits, how and why they will continue, and how investors can capitalize on this AI boom. Discuss other ways to try.
Moorhead offers some insight into where investors should start looking for the next big play: “Every time Arm wins, there's a customer that's winning. Who are the customers? From a licensing perspective, it's Qualcomm (QCOM). The other customers are people, like Amazon Web Services (AMZN) and people who like media technology. They're benefiting from that. We look at people first. What are the companies that are benefiting that may have been overlooked? I think that's the first place to start.”
For more expert insights and the latest market trends, click here to watch the full episode of Yahoo Finance Live.
Editor's note: This article was written by Nicholas Jacobino
video transcript
– Arm Holdings' stock price has soared to a record high. After beating analysts' expectations, the chip designer also showed positive prospects thanks to his AI. It shows that company growth is driven by the need for more energy-efficient computing and AI capabilities.
Now we're joined by Patrick Moorhead, Founder, CEO, and Chief Analyst of Moor Insights and Strategy. Patrick, it's always a pleasure to meet you. Let's dig a little deeper here. As Arm reports, Patrick, investors clearly like what they're seeing. You had time to look over the report. I would like to hear your opinion on the results. And then, Patrick, maybe you can explain the craze that we're seeing today.
Patrick Moorehead: Yes, thank you, Josh. I mean, it doesn’t get any better than this, right? They had a beat for the quarter. And the next quarter they pulled up. And they raised the annual guidelines.
And I remember when I was commenting on this right before they started talking about growth opportunities. And I feel like what we're seeing now is part of what's beginning to be recognized. In other words, this combination is a direct link between what the company says and what the company does.
That makes perfect sense to me, right? The entire market is growing due to AI. They are gaining market share in both infrastructure and automotive, including Amazon Web Services, Azure, and new cobalt processors.
And within the markets they're in, like smartphones, there's an increase in content. They are expanding his area on the PC. And finally, we're adding more of these great services so that our end customers don't have to do all the heavy lifting to build their chips. So what you're seeing here is exactly that result.
– Patrick, that all sounds great. But today, the stock is up 49%. And we're not talking about penny stocks. So this is a $100 billion plus company that has generated the profits that we're seeing today. Yeah, I mean, again, what you said was good. But what is causing the extremeness of this movement that we are seeing?
Patrick Moorehead: So we can say this is rich, right? And especially when you compare it to Intel and Qualcomm and even NVIDIA, right? And what investors are hoping is that Arm will move into some areas that it hasn't been in before, maybe infrastructure. It's going to take a lead in the structure, which would be bad for AMD and Intel, but it could be very big in PC, and it would be very beneficial for companies like Qualcomm. Sho.
Yeah, I think this reaction is that they're betting big on the future, and maybe even things that aren't on Arm's roadmap yet.
– And, Patrick, to all the investors who are listening right now and are looking for smart ways to leverage AI — and we talked to you about this —
Patrick Moorehead: right.
– –In a previous show, you know Microsoft, you know NVIDIA– As someone who knows this company inside and out, Patrick thinks Arm is a smart long-term strategy for its broad, secular AI theme. mosquito?
Patrick Moorehead: Well, I think Arm is a play on AI. And frankly, not many people talk about this. But tech people understand that. Most AI actually runs on the CPU. And that goes against popular belief. But that's just a fact.
Currently, industrial strength training of these models is done on GPUs, which benefits companies like NVIDIA and AMD, and in the future, Intel as well. And, however, most of the inference that runs these programs still occurs on the CPU. And what I always say is that until NVIDIA and AMD figure out a way to launch GPUs, you'll always need CPUs along with GPUs.
– So, Patrick, speaking of reasoning, what does this mean about the broader chip world? There was a desperation on the part of investors to find the next NVIDIA. And maybe that explains some of what we're seeing today. So where else should people look, especially if, as you say, there's a huge opportunity in CPU as well?
Patrick Moorehead: So, yeah, I think we can just accept what Arm did. And for every win Arm has, there's a winning customer. And who is Arm's biggest customer? From a licensing standpoint, it's Qualcomm. And the other is companies like Amazon Web Services and MediaTek, and the people who are benefiting from that.
So, the first thing I look at is what companies are making profits that may be overlooked by the rest of the world. I think that's the starting point.
– Thank you so much Patrick. We're always happy to hear from you, especially on days like these and movements like this. Thank you very much.
Patrick Moorehead: thank you.
