From IPO High To Stock Slide: Arm Holdings' Rollercoaster Ride Begins With Bearish Analyst Call

Zinger Key Points
  • Arm's ADRs plummet 7.4% to $56.55; Bernstein Research flags concerns.
  • RISC-V emerges as a formidable rival, posing a challenge to Arm's dominance.

Arm Holdings Plc‘s ARMH recent debut on the Nasdaq hasn’t been a smooth ride.

The British chip designer, known for powering smartphones, saw its American Depository Receipts (ADRs) make a staggering 7.2% nosedive to $56.37 during Monday afternoon trading.

But what’s got investors hitting the panic button?

Arm Holdings plc’s stock has dropped nearly 20% from its IPO peak:

What Happened To Arm Shares Monday?

Bernstein Research recently initiated coverage of Arm with an Underperform rating and a rather gloomy $46 price target per share. Their rationale?

Arm might be losing its edge in the artificial intelligence frenzy, with over 60% of its revenues tied to mobile and consumer markets, as Barron’s reported Monday.

There’s an unexpected David challenging this Goliath – the open-source RISC-V chip architecture. Manufacturers can use it for free, evading those hefty royalty fees.

Sound like déjà vu? Think of Linux in the operating system arena. Sara Russo, the analyst responsible for the rating, cautions that RISC-V is rapidly garnering trust as a substitute for both x86 and Arm in specific applications.

But that’s not all.

China Is A Sword of Damocles For Arm

China, a double-edged sword for many tech giants, accounts for 24% of Arm’s revenue.

Rising tensions between Washington and Beijing, coupled with China’s penchant for non-Western tech, could threaten Arm’s long-term growth.

Now read: Is ARM Holdings Stock Going To Pay Dividends?

Photo via Shutterstock.

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