Wall Street Bullish on Arm Holdings plc (ARM) amid AI and Data Center Opportunity

Arm Holdings plc (NASDAQ:ARM) is one of the AI stocks analysts are betting on. Raymond James initiated coverage of Arm Holdings plc (NASDAQ:ARM) on November 20 with a Market Perform rating, impressed by the gains the company is making in the data center sector.

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The research firm has touted the company’s business model that entails licensing semiconductor intellectual property to fabless semiconductor customers. In return, it can collect royalties as part of its high-margin business model. Consequently, the company has delivered impressive returns amid the AI boom, with a remarkable 97.39% gross profit margin and annual revenue exceeding $4 billion.

Currently, data centers account for about 20% of the company’s total sales, owing to significant exposure to tech heavyweights Amazon, Google, and Microsoft. Raymond James expects Arm Holdings to capture more value along the value chain as it seeks to become a fabless semiconductor provider.

On the other hand, Loop Capital raised Arm Holdings’ Price target to $180 from $155 on November 12, while reiterating a Buy rating, impressed by its solid third-quarter results. The company posted a 21% year-over-year increase in royalty revenue, driven by growth in data centers, smartphones, and the Internet of Things.

Arm Holdings plc (NASDAQ:ARM) enables AI by designing high-performance, power-efficient CPU architecture licenses that are used in everything from smartphones to massive data centers. It does not manufacture chips; instead, it licenses its intellectual property to companies like Apple and Nvidia, which then build chips based on ARM’s designs, profiting from licensing fees and royalties.

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Disclosure: None. This article is originally published at Insider Monkey.