Arm Holdings shares rose more than 40%, contributing to a stunning run spurred by excitement about artificial intelligence.
Arm Holdings (O9Ty.F) shares rose more than 40% on Monday, adding to a dizzying gain spurred by excitement about artificial intelligence.
The stock last traded up 21% at $139.65, having reached a high of $164, 42% above its Friday close.
With Monday’s increase, Arm’s shares have risen by more than 80% since the British tech company became Wall Street’s newest AI-related darling last Wednesday after exceeding Wall Street’s expectations with its quarterly guidance.
Arm’s stock market valuation has risen to a record $141 billion, virtually tripling since its initial public offering last September.
According to Ihor Dusaniwsky, managing director of predictive analytics at S3 Partners, which tracks short sellers, nearly 10.5 million Arm shares worth approximately $1.4 billion have been sold short by speculators wagering the stock will decline.
However, there is minimal evidence that Monday’s stock jump was caused by a short squeeze, which occurs when short sellers hurry to purchase back shares to cover a potentially lost bet, according to Dusaniwsky.
“Although there has been some short covering, the primary reason for the stock move is long share buying,” Dusaniwsky said in a statement.
The latest surge in Arm’s stock mirrors significant increases in Nvidia’s (NVDA.O), which opened a new tab in May 2023, when the Silicon Valley chipmaker indicated AI computing was driving massive demand for its devices.
After more than tripling its stock market value last year, Nvidia surpassed Amazon.com (AMZN.O) on Monday to become the fourth most valuable corporation in the United States, trailing only Alphabet (GOOGL.O).
Unlike Nvidia, only a small portion of Arm’s shares are available for trade. Following its IPO, owner Softbank retained a 90.6% share. According to LSEG data, the chip designer’s 10 largest shareholders own about 95% of the company’s shares. The small number of Arm shares available for trading may have contributed to the stock’s recent spike.
By comparison, Nvidia’s top ten stockholders own around one-third of the company.
Softbank may sell some of its arm holdings beginning March 12 after the IPO lock-up period expires.
According to LSEG statistics, Arm is trading at an extremely high 99 times expected earnings following Monday’s rise, despite analysts drastically raising their earnings predictions last week.
Last June, Nvidia’s forward PE temporarily reached 84, but then plummeted as analysts lifted their profit projections quicker than the company’s stock rally. Nvidia’s stock is now trading at 34 times its projected earnings.
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