Arm Holdings plc (ARM): A Bull Case Theory

We came across a bullish thesis on Arm Holdings plc on r/valueinvesting by Significant-Foot3928. In this article, we will summarize the bulls’ thesis on ARM. Arm Holdings plc's share was trading at $105.11 as of January 15th. ARM’s trailing and forward P/E were 134.60 and 46.08 respectively according to Yahoo Finance.

ARM Holdings sits at the center of the global semiconductor ecosystem, with its influence continuing to expand across multiple high-growth markets. The company’s designs currently power nearly all smartphones and are increasingly being adopted in data centers, AI accelerators, automotive systems, and edge computing devices. As computing shifts toward energy-efficient architectures, ARM’s technology is increasingly preferred over traditional x86 solutions, positioning the company as a critical enabler of the next generation of computing.

 ARM operates a high-margin, royalty-based business model, which scales efficiently with global chip volumes while requiring minimal capital investment, giving it strong operating leverage. This model is particularly advantageous as AI workloads surge and hyperscale cloud providers increasingly deploy ARM-based CPUs, supporting sustained long-term growth. Despite these favorable dynamics, the stock has retraced roughly 40% from its all-time highs and declined 25% over the past year, creating a potential opportunity for a rebound.

The combination of ARM’s dominant market position, exposure to rapidly growing technology trends, and capital-light, scalable model underpins a compelling risk/reward profile. Investors may benefit not only from the company’s expansion into emerging markets such as AI and edge computing but also from the resilience and profitability embedded in its core smartphone business.

Overall, ARM represents a high-quality technology investment with multiple catalysts for upside, including broader adoption of its designs across next-generation computing platforms, continued growth in global chip demand, and a strong, royalty-driven earnings model that can magnify returns as volumes increase. The current valuation and recent stock weakness suggest a favorable entry point for long-term investors.

Previously, we covered a bullish thesis on Arm Holdings plc (ARM) by Stock Analysis Compilation in December 2024, which highlighted the company’s royalty-based business model, diversification into high-growth markets, and momentum in its next-generation Armv9 architecture. ARM’s stock price has depreciated by approximately 20.5% since our coverage due to investors considering realizing an overvaluation. Significant-Foot3928 shares a similar thesis but emphasizes ARM’s expanding role in AI, data centers, and edge computing, positioning it as a critical enabler of energy-efficient computing.

Arm Holdings plc is not on our list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 37 hedge fund portfolios held ARM at the end of the third quarter which was 41 in the previous quarter. While we acknowledge the risk and potential of ARM as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than ARM and that has 10,000% upside potential, check out our report about this cheapest AI stock.

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Disclosure: None.