AI-fuelled excitement continued on Wall Street today after shares in chip designer ARM Holdings ADR (NASDAQ:ARM) rocketed to a record and the S&P 500 index stayed near an all-time high of 5,000.
The benchmark has doubled since the March 2020 pandemic low and accelerated from 4,000 to nearly 5,000 in less than three years, driven in recent months by soft landing hopes for the US economy and the robust earnings of the Magnificent Seven tech-focused stocks.
Shares in Facebook owner Meta Platforms Inc Class A (NASDAQ:META), for example, are up 35% so far this year after last week declaring its first-ever dividend alongside a 200% jump in fourth-quarter profits.
Arm followed suit last night by reporting an “outstanding” third-quarter results performance as demand for new technology “driven by all things AI” boosted licensing revenues.
The shares jumped 60% in early deals Thursday to over $125, leaving Nasdaq-listed Arm more than double September’s starting price of $51 a share and the $46.50 seen in late October.
Source: TradingView. Past performance is not a guide to future performance.
Arm’s performance evoked memories of its first stock market debut three decades earlier, when digital mobile phones, set-top boxes and Bluetooth created the initial excitement.
That listing took place in both London and on Nasdaq in April 1998, eight years after Arm was created as a joint venture between Acorn Computers, Apple and VLSI Technology.
Japan’s SoftBank, which bought Arm for £24 billion in 2016, chose New York for September’s return when the Cambridge-based company was valued at $54.5 billion (£43.3 billion).
Last night’s record revenue figure of $824 million came in 14% higher year-on-year, with earnings per share of $0.29 well above previous guidance.
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The company said: “From the most complex AI cloud applications to the smallest edge devices, AI on Arm is everywhere.”
Arm’s results included a new and improved estimate for full-year revenues of up to $3.2 billion and earnings per share in the range of $1.20-$1.24.
Chief executive Rene Haas said: “We expect next quarter to be even better and yet another record.”
He highlighted a focus on growing royalty revenue, the need for more AI across all markets and the company’s “unrivalled developer ecosystem”.
Haas said: “We believe this is only the start and that our strategy will drive significant revenue growth for years and decades to come.”
The tech-weighted advance for the S&P 500 has come despite the prospect of interest rates staying high for longer, with May now the most likely date for a pivot in Federal Reserve policy.
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US investors remain optimistic about the outlook, one in which the US economy could potentially provide a Goldilocks scenario of solid growth and cooling inflation.
UBS Global Wealth Management told clients this morning that investors should not be concerned by the sight of the S&P 500 at an all-time high. The benchmark set an intraday high of 4,999.89 in yesterday’s session and stayed above 4,990 in today’s early dealings.
The Swiss bank said: “With recovering earnings and normalising inflation providing a favourable backdrop for equities, we retain our preference for quality.
“We also think small-cap stocks in the US and Europe, and emerging market equities will be particular beneficiaries in a Goldilocks scenario.”
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