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Arm Holdings shares surge 40% amid AI optimism

Written by Tue 13 Feb 2024

Image Credit: Reuters

Shares of British semiconductor company, Arm Holdings, rose 40% fuelled by optimism surrounding artificial intelligence (AI).

Stock in Arm Holdings surged 21% to £110.85 ($139.65), hitting a high of £130.18 ($164), 42% above Friday’s close. 

Since the semiconductor firm exceeded Wall Street’s quarterly outlook predictions, shares in the company have risen 80%. Arm’s market value has surged to £111 billion ($141 billion), almost tripling since its September IPO. 

Ihor Dusaniwsky, Managing Director of Predictive Analysis at financial data marketplace platform, S3 Partners, said around 10.5 million Arm shares were sold short by traders betting that the stock will fall. This number is worth around £1.1 billion ($1.4 billion). 

Reuters reported that Dusaniwsky stated Monday’s stock surge is not likely due to a short squeeze, where short sellers hurriedly buy back shares to cover potential losses.

“Although there has been some short covering, the primary reason for the stock move is long share buying,” said Dusaniwsky.

Arm’s stock is trading at 99 times expected earnings, despite analysts raising earnings estimates. The limited availability of Arm’s shares could be amplifying its price surge. Softbank can start selling its Arm stake after lock-up restrictions related to the initial public offering (IPO) end. 

SoftBank is a Japanese investment company that acquired Arm in 2016 for £25.3 billion ($32 billion).

In August, Arm applied for a listing on the NASDAQ stock exchange in what was thought to become one of the biggest IPOs of the year. While the filing did not list a price, an internal transaction by SoftBank valued Arm at £50.6 billion ($64 billion).

SoftBank kept a 90.6% stake in Arm following the IPO. The investment company was previously said to be planning to sell between £6.3 billion ($8 billion) and £7.9 billion ($10 billion) shares.

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Written by Tue 13 Feb 2024

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