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2023.09.19 07:12
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Bernstein "pours cold water" on Arm: It's too early to say AI is the winner

The first investment bank to pour cold water on Arm has emerged! Bernstein believes that the market's expectations for ARM's revenue growth are overly optimistic as the mobile terminal market matures.

On the third day of its listing, the stock of Arm, a newly listed chip design company, fell by about 4.5%, and the first investment bank to "pour cold water" on it appeared!

In the overnight U.S. stock market, the stock price of Arm, the newly listed chip design company, fell by 4.5%. Previously, Bernstein rated the company as "underperforming the market," implying that the company may not benefit from the AI boom as some investors expected.

The stock price of Arm once fell by 9.4% to $55.02, lower than the opening price of $56.10 last Thursday. Although the stock recovered most of its losses on Monday, closing down 4.5%, Bernstein's target price of $46 suggests that the stock may further weaken.

It is worth mentioning that Arm's decline on Monday is in sharp contrast to the entire industry. The Philadelphia Semiconductor Index rose by 0.5%. Among them, Advanced Micro Devices rose by 0.9%, and Lam Research rose by 2%.

Bernstein analyst Sara Russo pointed out:

Although the expectation that Arm will benefit from the growth of artificial intelligence may bring a premium to the stock price, we believe it is too early to announce Arm as the winner in the field of artificial intelligence. As the mobile terminal market matures, we believe that the expectations for revenue growth are overly optimistic.

Bernstein is the third company to rate Arm, and so far, the market's rating distribution for the company is even. In addition to Bernstein's "underperforming the market" rating, New Street Research recommends "buying" the stock, while Needham's rating is "hold".

Last week, Arm sold $4.87 billion worth of shares to the public, making it the largest IPO of the year. Arm provides semiconductor design "blueprints" to technology companies and collects royalties from their use. In addition, it licenses the fundamental technology that controls the communication between chips and software.

This means that it is an influential company with a presence in every major technology company in the world. The challenge for the company is how to translate this influence into greater revenue. Bernstein analyst Russo expressed a conservative attitude towards whether the company has the ability to increase royalty rates in accordance with management guidance.