MW Arm may be on the verge of a big strategic shift - competing with its customers

By Therese Poletti

Arm's stock jumps 6% following a report saying that the company plans to debut a new chip with Meta

Arm Holdings PLC may be on the verge of a major strategic shift in its business - and one that would put it squarely in competition with its customers like Nvidia Corp. and Qualcomm Inc.

According to a report Thursday by the Financial Times, Arm $(ARM)$ plans to debut a new chip as early as this summer, with Meta Platforms Inc. $(META)$ as its first customer. Arm is noteworthy in the semiconductor industry because the U.K.-based company licenses out its chip designs and does not sell any chips. Its mobile processor designs are the core processors for smartphones, including Apple Inc.'s $(AAPL)$ iPhone.

Arm's American depository receipts rose 6% on Thursday, as investors began to assess the implications of Arm's shift to competing with its biggest customers, and what it would mean for its licensing business.

The FT reported that the new Arm chip would be a central processing unit for large data centers, to run AI applications - presumably with lower power consumption, which is one of Arm's key technology strengths.

A spokeswoman for Arm in the U.S. declined to comment on the report. Nvidia Corp. $(NVDA)$ also declined to comment, citing the company's quiet period ahead of earnings later this month. Qualcomm Inc. $(QCOM)$ did not immediately respond to requests for comment.

Arm, which went public in 2023, is majority-controlled by SoftBank Group Corp. of Japan (JP:9984) and the FT reported that the company's shift to designing its own chips is part of SoftBank founder and Chairman Masayoshi Son's plan to move into AI chip production.

Arm executives did not offer any kind of hint of an upcoming strategic shift on its recent earnings call. Last month, it said it would be part of the massive Stargate joint venture, a data-center infrastructure initiative being planned by OpenAI, in partnership with Nvidia, Arm and Oracle Corp. $(ORCL)$.

Also read: Arm's outlook doesn't live up to the hype after the stock's big rally this year.

"Combined with the Blackwell CPU with Grace, Arm will be the CPU of choice for the initial configurations," Arm Chief Executive Rene Haas told analysts on the company's earnings call. "And going forward, there'll be a huge potential for technology innovation around that space."

In 2020, Arm agreed to be acquired by Nvidia in a $40 billion deal, but that ultimately fell apart after it failed to pass regulatory approval. The FTC contended in its lawsuit to stop the deal that it "would allow the combined firm to to unfairly undermine Nvidia's rivals."

-Therese Poletti

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February 13, 2025 16:12 ET (21:12 GMT)

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