Shares of Arm Holdings (ARM 3.98%) were gaining on a broader surge in the market and on artificial intelligence (AI)-specific news.

First, stocks jumped in Trump's first full day in office, as he avoided enacting tariffs, which is favorable for global trade and economic growth, as most investors see it. Second, Trump is announcing a new AI infrastructure investment that looks set to benefit Arm.

As a result, Arm stock finished the day up 4%, jumping in afternoon trading as news broke about Trump's AI plans.

Image source: Getty Images.

How Arm fits into Trump's AI plans

President Trump has brought OpenAI CEO Sam Altman, Oracle founder Larry Ellison, and Softbank CEO Masayoshi Son to the White House to announce a private-sector AI infrastructure investment of up to $500 billion in a data center project known as Stargate.

The news benefits Arm in two primary ways. First, the company's energy-efficient chip designs give it an advantage in the data center, where conserving power is a key priority. Second, Masa Son's Softbank is the majority shareholder in Arm, and his position in Stargate should also benefit Arm. His proximity to Trump could help tailor federal policy to benefit the chip stock best known for its CPU architecture as well.

What's next for Arm?

Arm stock is expensive, but the company has a clear competitive advantage in its industry. Its power-efficient chips have 99% market share in the smartphone market, and it's gaining share in the data center segment for similar reasons.

While investors should be mindful of the valuation, as it trades at a price-to-sales ratio of 45, Arm looks well positioned for future growth. It's a good candidate to buy on future pullbacks.