Susquehanna Sees Over $1B Annual Royalties From Arm's (ARM) AI XPU

Arm Holdings plc (NASDAQ:ARM) ranks among the most promising QQQ stocks according to hedge funds. Susquehanna raised Arm Holdings plc (NASDAQ:ARM) from Neutral to Positive on January 21, with a $150 price target. The firm noted two “company-changing initiatives” as major triggers for the upgrade, including the production of an AI XPU ASIC together with SoftBank and Broadcom for OpenAI, as well as a custom server CPU, possibly for Meta, which will be Arm’s first full silicon product.

Although details on the AI XPU are scant, Susquehanna believes the program could ultimately earn more than $1 billion in royalty revenue each year, in contrast to the $2.5 billion in total company royalties projected for this year.

Susquehanna expects a royalty default for 2026 models given memory-driven headwinds in Mobile and PC markets, though it notes that such obstacles are “well known”, contrasting the stock’s recent 40% drop with efforts that might boost growth above Arm’s existing “modest ~10% royalty contribution.”

Arm Holdings plc (NASDAQ:ARM) designs and licenses CPU architectures, system IP, and software used across automotive, computing, consumer, and IoT applications.

While we acknowledge the potential of ARM as an investment, we believe certain AI stocks offer greater upside potential and carry less downside risk. If you're looking for an extremely undervalued AI stock that also stands to benefit significantly from Trump-era tariffs and the onshoring trend, see our free report on the best short-term AI stock.

READ NEXT: 10 Best Magic Formula Stocks for 2025 and 10 Best Retirement Stocks to Buy According to Hedge Funds.

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