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Arm Stock's 46% Drawdown Tests $2 Billion Demand Claim
Arm's stock has swung on the same customer-demand figure three times in four months, with the chip designer plunging from an early-September peak near $452 in June to just under $244, a 46% drawdown reflecting a broader unwind of AI capital-spending optimism. On September 18, shares closed at $275.61, up 4.04%, after CEO Rene Haas told Jim Cramer that demand for Arm's technology has "never looked better." Haas has cited the AGI CPU demand figure before: Arm unveiled the chip in March with a roughly $1 billion revenue guide across fiscal 2027 and 2028, and by May disclosed customer demand had already surpassed that figure, yet the stock fell because the guide did not move. In July, Haas said demand "now exceeds $2 billion," and in September the same $2 billion figure produced the biggest rally yet, with the tone changing because supply confidence improved across wafers, substrates, test capacity, and memory. Margins on the in-house silicon are modest by Arm's standards, with first-generation gross margin expected in the high 30% range, maybe low 40s, and a longer-term path to 50%, compared to Arm's corporate 92.5% gross margin on royalties. NVIDIA's Arm-based Vera CPU, which Haas said delivers "up to 50% higher CPU performance and two times greater energy efficiency than comparable x86 systems," feeds Arm's royalty stream, while Qualcomm's Nuvia license trial in Q4 2026 could reprice royalties across the entire industry.
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Meta's Muse Launch Powers Arm and AMD as Agentic AI Demand Surges
Meta Platforms launched Muse, an autonomous personal AI agent that shot to the top of the Apple App Store within a week, and the agentic AI shift is driving gains for Arm Holdings and Advanced Micro Devices. In March, Meta and Arm announced a large-scale partnership to co-develop Arm AGI CPU and multiple generations of specialized silicon for Meta's data centers, and Arm CEO Rene Haas said Arm already has $2 billion of customer demand for its new AGI CPU. SoftBank, which owns roughly 90% of Arm's shares outstanding, said it would raise Arm's loan facility to $25 billion from $20 billion, and Arm shares rose more than 10% in early trading. Meta partnered with AMD to optimize Muse Glimmer, an open-source model designed to run locally on computers, and demand for agentic AI has pushed prices for AMD server chips up about 40%. AMD CEO Lisa Su said the server CPU market could exceed $120 billion by the end of the decade, a 35% CAGR, and AMD shares broke out to all-time highs as the company crossed the $1 trillion market cap landmark for the first time.
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Jim Cramer Calls Selling Arm Holdings Early a "Big Mistake" as Stock Sits 46% Below June High
Jim Cramer said selling Arm Holdings early was a "big mistake," noting on the September 16 episode of Mad Money that the stock has fallen 46% from its June high of $452 to just under $244. Arm's fiscal first quarter 2027 results showed total revenue of $1.29 billion, up 22% year over year, with royalty revenue up 22% to $715 million and licensing revenue up 23% to $574 million, while data-center royalties more than doubled and the company posted a non-GAAP operating margin of 41% and $665 million in non-GAAP free cash flow. Management expects Q2 FY27 revenue of $1.38 billion with a $50 million margin of error, non-GAAP operating expenses of about $780 million, and non-GAAP fully diluted earnings per share of $0.47 with a $0.04 margin of error, with results due by November 4. The stock trades at around 110x forward earnings, and short interest stood at 11.52% of the public float as of August 31, while 52 hedge fund portfolios held a stake in the second quarter, up from 46 in the prior period. Cramer argued that panicking over steep pullbacks in dominant tech leaders is a losing game, calling short-term drops buying opportunities for patient investors given Arm's royalty growth and tight supply.