Arm Stock Is Down More Than 40%. Here's Why I'm Staying on the Sidelines.
Arm's royalties arrive when chips ship, and phones still drive the biggest share. The business looks fine -- it's the price that gives me pause.
Overview
Shares of chip designer Arm Holdings (NASDAQ:ARM) fell nearly 10% on Monday as a sell-off swept across artificial intelligence (AI) stocks. The slide followed a weekend essay from Anthropic CEO Dario Amodei arguing that the industry should slow the pace at which it improves AI model capabilities. And other tech leaders, including OpenAI CEO Sam Altman, quickly backed the idea.
The drop leaves Arm shares around $239 as of this writing, more than 40% below their 52-week high of $452.70. Clearly, a lot of the stock's value rides on AI enthusiasm.
Details
But an argument about how fast frontier models should improve says little, at least directly, about how Arm makes money. The company collects licensing fees when chipmakers sign up to use its designs, and it collects a royalty on nearly every chip that ships with its technology inside.
Source
Originally published at www.fool.com.