ARM Stock: Can Arm’s Pivot to Chipmaking Unlock $15bn in Revenue?

Arm [ARM] surged 16% on 25 March after projecting that its newly unveiled in-house chip could bring in $15bn in revenue by 2031.

The British semiconductor and software design company introduced its first-ever internal processor, the AGI CPU, at a San Francisco event. Built specifically for AI inference in data centres, the chip comes as demand for central processing units (CPUs) accelerates amid the rise of agentic artificial intelligence (AI), a form of AI that performs tasks on behalf of users without requiring continuous input.

CEO Rene Haas (pictured) said that the AGI CPU alone is expected to drive $15bn in revenue by 2031, contributing to total annual revenue of $25bn and EPS of $9.00. The projection represents a sixfold increase over Arm’s $4bn in revenue for 2025.

“It’s a $1tn market, and what we’re seeing over and over again is… our partners coming out and understanding and realising this is actually great for the industry,” Mohamed Awad, Executive Vice President of Arm’s Cloud AI Business Unit, told CNBC.

Meta [META] will be the first confirmed customer for the new chip, as the company ramps up massive data centre expansions and targets up to $135bn in AI-related capital spending this year. Early adopters also include OpenAI, Cloudflare [NET] and SAP [SAP].

Arm is also collaborating with Taiwan Semiconductor Manufacturing Company [TSM] to bring the AGI CPU to market, targeting a launch later in 2026. It is partnering with server equipment makers, including Quanta Computer [QUCCF] and Lenovo [LNVGY], to provide fully integrated systems to customers.

What’s Been the Response?

Arm’s forecast prompted the largest one-day jump in its share price since April 9, 2025. SoftBank [SFTBY] – Arm’s majority owner – rose 7.9% in Tokyo. The British firm’s stock performance underpins CEO Masayoshi Son’s capacity to fund SoftBank’s investments in OpenAI and data centre expansions, as Bloomberg noted.

ARM stock has since descended from that peak, but remains up 25.30% in the year to date, and up 168.55% against its IPO in 2023. 

The launch will mark the “most significant shift in the company’s history,” Citi analysts said in a note.

“The $15bn in revenue forecast would, on those metrics, drive $7.5bn/$5bn in incremental gross/operating profit, such a significant increase versus prior expectations that we think the market should not worry about the change in margin structure. It is the incremental profit and cash flow that is the driver of shareholder value,” they wrote.

Seaport Research Partners similarly underlined that the AGI CPU represents a significant shift from Arm’s traditional role as an IP provider, indicative of its ongoing evolution.

“We see this as risky, but a highly compelling opportunity for the company to greatly enhance its earnings power in a rapidly growing market,” the analysts wrote.

In an unusual move, HSBC double-upgraded the stock in the days following the announcement. The bank raised its rating to ‘buy’ from ‘reduce’ and more than doubled its price target to $205 from $90 – the highest target on Wall Street.

“We believe Arm is now firmly in the middle of a transition from being a smartphone-dependent semi-IP play, into a major AI server CPU beneficiary that remains undervalued by the market,” wrote analyst Frank Lee.

But Can Arm Actually Compete?

Arm faces stiff competition in the data centre processor market. 

Startups and established players alike are attempting to challenge Nvidia’s [NVDA] dominance with a range of approaches, and Nvidia itself recently launched a new CPU lineup targeting the same space Arm is entering. CEO Rene Haas insists, however, that the AGI CPU is aimed at a different segment of the market than Nvidia’s latest offerings.

The move also raises potential tensions with Arm’s own customers. Many of the largest data centre operators, including Meta, run their own in-house chip programs while also licensing technology from Arm. Offering a proprietary CPU could complicate these relationships.

Arm is betting on power efficiency to differentiate itself from traditional x86 CPUs from Intel [INTC] and Advanced Micro Devices [AMD]. According to CEO Haas, data centre operators using the AGI CPU will get more computing power from the same physical footprint and electricity budget. He argues that the chip directly challenges Intel and AMD’s dominance, and that capturing share in a rapidly expanding market will benefit both Arm and its customers.

Challenging Chip Giants: INTC vs AMD vs ARM

Let’s tighten the focus on those two competitors singled out by Haas. 

In the evolving AI data centre landscape, the three stocks each offer distinct investment stories driven by broad industry trends and recent developments.

Arm’s pivot from pure IP licenser to full AI CPU-maker has captured investor attention. Early partnerships with Meta and OpenAI signal potential traction in energy‑efficient AI inference workloads, a segment adjacent to but not wholly overlapping with other players’ strengths.

AMD sits in a strong competitive position with its EPYC server CPUs and MI450 AI accelerators driving datacentre demand. Analysts are upbeat on long‑term growth and potential upside, backed by expanding partnerships and system‑level deals that blend CPUs and accelerators – a combination that investors favour for the diversified revenue streams it offers.

Intel’s stock has recently benefited from improved manufacturing yields and data centre demand, but execution concerns and mixed guidance temper near‑term enthusiasm.

For investors, AMD’s momentum and Arm’s ambitious pivot may offer more compelling growth narratives than Intel’s slower‑burn recovery, though all three stand to benefit from booming AI infrastructure spending.

Conclusion: The Investment Case for ARM Stock

ARM stock offers a compelling growth story for investors bullish on AI and data centre expansion. The AGI CPU positions the company to capture a slice of the rapidly growing AI inference market. Power efficiency and potential x86 displacement add to the upside case. On the flip side, competition is fierce, with Nvidia, Intel and AMD vying for the same market, while Arm risks straining relationships with licensees that also run in-house chips. Execution and adoption will determine whether the stock can build on its rally following the announcement.