New Street Upgrades Arm Holdings (ARM) to Buy Following Strong Royalty Performance

Arm Holdings (NASDAQ:ARM) is one of the worst AI stocks to invest in according to Reddit. On February 5, New Street analyst Pierre Ferragu upgraded Arm Holdings to Buy from Neutral.

However, on the same day, Jefferies lowered its price target for Arm Holdings to $170 from $205 with a Buy rating. Despite strong results and guidance, the firm noted that Arm’s shares faced pressure due to investor concerns that rising memory prices could reduce smartphone sales volumes. However, the firm clarified that while price hikes primarily affect the low-to-mid-end market, Arm’s growth is driven by high-end smartphone chips that utilize v9 and CSS architectures.

KeyBanc also lowered its price target for Arm Holdings (NASDAQ:ARM) to $170 from $200 and kept an Overweight rating, despite the company delivering strong Q3 2025 results and raising its Q4 guidance. The firm noted that Arm exceeded expectations in both royalties and licensing, but management acknowledged that rising memory prices and supply shortages are expected to dampen handset royalty growth.

Arm Holdings (NASDAQ:ARM) architects, develops, and licenses central processing unit products and related technologies for semiconductor companies and original equipment manufacturers.

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: 30 Stocks That Should Double in 3 Years and 11 Hidden AI Stocks to Buy Right Now.

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