Arm stock price surges 15%, the company expects new chips to generate huge revenue, achieving a "significant transformation"

Arm’s stock price surged 15% in Wednesday morning trading, after the company announced that its newly released in-house chip will generate $15 billion in revenue by 2031.

This British semiconductor and software design company unveiled its first self-developed chip, the AGI CPU, at an event in San Francisco on Tuesday. The chip is designed for AI inference in data centers, with demand for central processors surging alongside the rise of agent-based AI.

Arm CEO Rene Haas stated at the event that the new chip is expected to generate $15 billion in revenue by 2031, when the company’s annual total revenue will reach $25 billion, with earnings per share of $9. This revenue forecast is six times its 2025 annual revenue of $4 billion.

The stock closed down 1.5% on Tuesday.

On Wednesday, other chip stocks also rose, with Nvidia, Advanced Micro Devices, and Intel all gaining.

For decades, Arm has typically licensed its instruction set to other companies and collected royalties on each processor made using its designs. However, by launching its own chips, it is now competing directly with its customers, including Amazon, Microsoft, Nvidia, and Google.

“Major Shift”

Citigroup analysts said in a report on Wednesday that Arm’s announcement is “the most significant change in the company’s history.” They noted that while the company’s involvement in chip manufacturing has long been public knowledge, the news of its fully autonomous server chips, support from major companies like Meta and OpenAI, and optimistic revenue projections surprised the market.

The analysts stated, “Arm’s forecast is even far higher than the most aggressive speculative estimates,” which should ease concerns about changes in the company’s profit margin structure.

They added, “The $15 billion revenue forecast, based on these metrics, would bring in an incremental gross profit/operating profit of $7.5 billion/$5 billion, a significant increase compared to previous expectations. We believe the market should not worry about profit margin shifts. Increasing profits and cash flow are the true drivers of shareholder value.”

Meta is the first official customer of Arm’s new chip, as the company is committed to large-scale data center construction and plans to invest $135 billion in AI-related fields this year. OpenAI, Cloudflare, and SAP are also among its initial clients.

Arm Cloud AI head Mohamed Awad said, “This is a trillion-dollar market, and what we keep seeing is that our partners are beginning to understand and recognize that this is actually very beneficial for the industry.”