SAN FRANCISCO: Arm Holdings Plc shares rose by the most in almost a year after the company announced plans to sell its own chips for the first time – a move forecast to generate about US$15bil annually within five years.
Meta Platforms Inc will be the first major customer for the company’s chip, called an AGI CPU, Arm said at an event here.
The product will have as many as 136 cores – a measure of processing power –and draw 300W of electricity, according to the UK-based company.
Taiwan Semiconductor Manufacturing Co will produce the chips.
The change is a major strategic shift for Arm, which made its name licensing technology to semiconductor makers.
As part of the move, Arm laid out aggressive sales targets for the coming years.
It expects revenue from the new chip business to eclipse sales from current operations, which focus on selling intellectual property (IP).
That will help generate total revenue of roughly US$25bil within five years, five times the level today, Arm said.
The IP business would continue growing, hitting about US$10bil by that point, the company predicted.
The outlook sent Arm shares up 16% on Wednesday, their biggest one-day gain since April 9, 2025.
Shares of SoftBank Group Corp, which owns a majority of Arm, rose 7.9% in Tokyo.
The British company’s stock price underpins the Japanese parent’s ability to finance chief executive officer Masayoshi Son’s bets on OpenAI and data centres.
Under chief executive officer Rene Haas, Arm has shifted from its roots as a provider of smartphone technology and taken a greater role in the data centre market.
The change is meant to help the business get more of the money generated by what is often complex and expensive work.
The shift also helps Arm benefit from bigger-ticket purchases. Even the most expensive smartphone chips cost tens of dollars. The highest-end data centre semiconductors can run in the tens of thousands.
Its earnings should reach US$9 a share in that time frame.
Analysts have estimated that earnings will be US$1.75 a share in the current fiscal year, excluding some items.
Chief financial officer Jason Child said that while Arm’s current offerings – semiconductor designs and technology licences – are more profitable in terms of margins, selling actual chips will bring in far more profit dollars.
On a theoretical US$1,000 chip, Arm gets about 5% in licensing revenue when customers use its instruction set – the basic code a chip uses to communicate with software. That’s pure profit. But if the client uses Arm’s designs, the profit payoff is about US$100. And if Arm makes the chip itself, it gets about US$500 in gross profit dollars, he said.
Arm decided to make the new chip because customers asked for it, Haas said.
The product – a central processing unit, often described as the brains of a computer – is designed to work alongside the accelerator chips offered by companies such as Nvidia Corp. It helps coordinate work between computers, prepares data and runs elements that provide a response to users making artificial intelligence queries, Arm said.
“The product that we’re building is not only compelling, but we actually have customers who are lined up to buy it,” Haas said in an interview.
The company said its product offers greater power efficiency compared with traditional central processing unit designs from Intel Corp and Advanced Micro Devices Inc. That means that data centre owners will be able to wring more computing power from the same footprint and electricity budget, Haas said.
Arm’s increasing reach is a direct threat to the so-called x86 data centre products made by Intel and AMD, Haas said.
Taking share from those traditional stalwarts in a rapidly expanding market will allow both his company and its customers to grow, he said.
“The market is plenty big enough for multiple players,” Haas said.
Investors agreed and bid up the shares of both Intel and AMD. Intel gained 7.1%, while AMD rose 7.3%.
Arm faces plenty of competition in data centre processors. A number of startups and established companies have sought to challenge Nvidia’s dominance in the field with a variety of approaches.
And Nvidia itself just introduced a new CPU lineup, targeting the category that Arm is now entering. Haas said his chip is aimed at a different part of the market than Nvidia’s latest addition.
Arm’s chip move also threatens to complicate its relationship with customers.
Most of the biggest buyers of data centre silicon, including Meta, have their own in-house chip programmes. And almost all of them licence technology and designs from Arm. — Bloomberg
