Anticipation: One Artificial Intelligence Company's Shares May Exceed Palantir Technologies' Value by Year's End in 2025
Sizzling Arm Holdings took the crown as the top performer in the S&P 500 (^GSPC -0.01%) in 2024, with a staggering 340% surge in its share price. This tremendous growth was driven by soaring demand for its cutting-edge artificial intelligence platform, delighting investors and pushing Arm's value up to an impressive $181.9 billion. However, this titan may have some serious competition looming on the horizon: semiconductor juggernaut Arm Holdings (ARM -3.21%).
By the year 2025, Arm could smash Palantir's record and top the $181.9 billion mark. At its current valuation of $148 billion, the company's stock would need to soar 23% to reach $174 per share for Arm to flaunt a market value of $182 billion. With growing interest in power-efficient AI infrastructure, this bullish forecast seems more than achievable.
Take a look at the market movers who back this prediction:
- Morgan Stanley: Analyst Lee Simpson, who sees the price reaching $175 per share.
- Evercore: Analyst Mark Lipacis, with a price target of $176 per share.
- Bank of America: Analyst Vivek Arya, who anticipates $180 per share.
- Loop Capital: Ananda Baruah, with a bullish prediction of $180 per share.
Now, time for a quick dive into what investors should know about this semiconductor sensation:
Arm: The Unstoppable Semiconductor Symphony
Arm isn't your typical semiconductor company. It specializes in designing and licensing central processing unit (CPU) architectures. In simpler terms, customers purchase the intellectual property (IP) and use it to manufacture custom chips tailored to their specific needs. Arm profits by charging licensing fees and per-unit royalties.
Beyond CPU architecture, Arm offers related technologies such as systems IP and software development tools. The former enables engineers to seamlessly combine CPUs, graphics processing units (GPUs), memory, and other hardware to create Arm-based systems, while software development tools simplify the process of developing applications on Arm chips for various domains like AI, robotics, and scientific computing.
Arm's chips have consistently outshone competitors in terms of power efficiency, making them a go-to choice for mobile devices, with a whopping 99% market share in smartphones. More recently, Arm has gained ground in the data center market, which has increased its market share by six percentage points over the last two years. This impressive feat can be attributed to Arm's strides in improving performance and impressive advancements in designed ARM-based chips for major public clouds, including AWS, Google Cloud, and Azure.
Is Arm's Stock Price Worth the Squeeze?
Wall Street predicts that Arm's adjusted earnings will grow an astounding 33% annually through fiscal 2027. Given this projection, the current valuation of 104 "times adjusted earnings" might appear expensive to some investors. But Arm has consistently outperformed Wall Street's forecasts, suggesting that their growth trajectory might be underestimated.
If Arm meets the consensus growth estimate and continues to astonish the world with impressive earnings, its share price could break through the $174 barrier, reaching a mammoth $182 billion market value. Even if earnings growth slows a tad, a slight lowering of the price-to-earnings multiple would allow the stock price to surge higher, potentially even surpassing Palantir Technologies' current market value of $252 billion.
Intriguingly, some Morgan Stanley analysts even argue that the stock could hit the astronomical heights of $300 per share before 2025, signifying a possible 112% increase from its current share price of $141. This could mark an extraordinarily successful year for Arm Holdings and its shareholders.
- If investors are looking to diversify their finance portfolio, they might consider investing in Arm Holdings, given its promising growth trajectory in the semiconductor industry.
- The company's focus on designing and licensing CPU architectures, along with related technologies like systems IP and software development tools, has led to its dominance in the smartphone market and recent inroads into the data center market.
- With major tech companies such as AWS, Google Cloud, and Azure adopting ARM-based chips, Arm Holdings is well-positioned to continue its surge in the stock market, potentially challenging Palantir Technologies' record market value by 2025.
- In light of Wall Street's predictions for Arm's adjusted earnings growth and the company's history of outperforming forecasts, some analysts believe that Arm's stock price could reach $180 per share, or even beyond, by 2025, making it an attractive investment opportunity for those interested in finance and the tech sector.
