Arm Holdings shares fell 34% in July as chip stocks broadly pulled back amid doubts about the durability of the AI boom and whether hyperscalers would earn a return on massive AI infrastructure spending. The decline outpaced the VanEck Semiconductor ETF due to Arm's high valuation, and HSBC downgraded the stock from buy to hold with a $315 price target, citing valuation concerns after the surge following the Arm Everywhere event. The company beat fiscal first-quarter estimates with strong royalty and licensing growth, and data center royalty revenue more than doubled, but analysts flagged capacity constraints and smartphone market weakness as potential headwinds. Arm plans to begin shipping its new AGI CPU in the fiscal fourth quarter, with demand already exceeding supply, and it guided to $15 billion in CPU revenue and $25 billion in overall revenue by fiscal 2031.
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