Arm Holdings Plc‘s ARMH recently debuted on the Nasdaq and it hasn’t been a smooth ride.
The British chip designer, known for powering smartphones, saw its American Depository Receipts (ADRs) drop by 7.2% to $56.37 during Monday afternoon trading.
But why are investors panicking?
Arm Holdings plc’s stock has dropped nearly 20% from its IPO peak.
What Happened To Arm Shares on Monday?
Bernstein Research recently initiated coverage of Arm with an Underperform rating and a price target of $46 per share. They believe Arm might be losing its edge in the artificial intelligence market, with over 60% of its revenues tied to mobile and consumer markets, as reported by Barron’s on Monday.
There is competition from the open-source RISC-V chip architecture, which manufacturers can use for free, avoiding hefty royalty fees. This situation is reminiscent of the rise of Linux in the operating system arena. Analyst Sara Russo warns that RISC-V is gaining trust as a substitute for both x86 and Arm in certain applications.
But that’s not all.
China Is a Double-Edged Sword for Arm
China accounts for 24% of Arm’s revenue. Rising tensions between Washington and Beijing, along with China’s preference for non-Western tech, could pose a long-term threat to Arm’s growth.
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