Stock Of The Week: The Next Trillion-Dollar AI Company?

This British technology success story is attempting to transform itself from a behind-the-scenes chip designer into a major AI player. In this analysis, we examine the opportunities created by artificial intelligence, edge computing and next-generation PCs, and whether the company can justify the lofty valuation required to reach trillion-dollar status.

Will ARM Holdings become Britain’s first trillion-dollar tech company?

Cambridge-based, chip design powerhouse ARM Holdings has had a chequered but exciting history.

It was spun out of Acorn Computers in November 1990, as part of a joint venture with Apple and VLSI technology (now NXP Semiconductor).

It was listed on the LSE and Nasdaq in April 1998, and would see its chip designs and architecture power some 99.0% of the world’s mobile phones, following the launch of the iPhone and Android devices.

ARM was acquired by Japan’s Softbank in September 2016, which would list a minority interest in the company on Nasdaq, seven years later.

When it was rumoured that Nvidia would have liked to have bought the whole business or, at worst, to have acquired a significant stake in ARM.

Softbank, for its part, retains an almost 90.0% holding in the company.

Always the bridesmaid, never the bride

ARM has always had the reputation of being the bridesmaid but never the bride, as far as technology stocks are concerned.

It’s been seen as an agency stock, that is working for other companies, but not really participating in their success.

That despite a royalty and licensing business model under which its revenues grew as customer products scaled.

That looks all set to change. ARM recently announced that it would start making its own chips to sell to end users.

It’s also become clear that the company stands to benefit from two powerful trends in computing and AI: the move towards edge computing and the emergence of inference in AI models.

ARM’s CPU designs are said to be ideally suited to inference models.

Next Generation

That’s not all, just this morning Microsoft and Nvidia have announced a deal aimed at “supercharging” Windows software, on PCs that use ARM chipsets.

The new Nvidia processor, called RTX Spark, contains 20 ARM-based CPU cores and will be able to perform a petaflop, or 1000 trillion operations per second:

“To put this immense power into perspective, if 8 billion people on Earth each completed one calculation per second, it would take them over 4-years to equal what a single 1-petaflop computer can accomplish in one second.”

Source: Ionos

The announcement is very timely, because it emerged at the weekend that ARM CEO, Rene Haas, could earn up to $1.0 billion, IF he guides the company’s market cap to $1.0 trillion, and to $2.0 trillion by 2031, compared to its current $373 billion.

A close relationship with Nvidia and Microsoft, in a new age of AI desktop computing, could be the catalyst to drive ARMs market cap towards the trillion-dollar mark.

Indeed, I recently wrote that ARM Holdings could become the next 10-bagger tech stock.

Performance

Year to date, ARM’s stock price is up by more than +223.0%, and it has posted 25 new highs in that time, effectively averaging 1 per week.

Over the last 3 months, ARM has posted 39 positive closes compared to just 26 losses, a ratio of 6:4. And we have seen numerous gaps higher in the chart to boot, with the stock trading above $400.00 in Monday’s pre-market session, on the Nvidia news.

 

 

Pros:

Unique position in the semiconductor supply chain
Ability to leverage its expertise through the manufacture of its own semiconductors
Exposure to the latest trends in computing and AI models.
Ground floor entry into the desktop AI market, in conjunction with Nvidia and Microsoft

Cons:

ARM has no foundry, so it will need to rely on third parties like TSMC or Intel to make its chips
Edge computing and inference, in AI models, are not yet widely adopted, time scales for that are opaque
Desktop AI is brand new, and the machines that run it won’t be cheap and could cost $10,000 or more a pop, so they won’t be a mass consumer product from the off.
Developments in quantum computing could shift the goal post in traditional computing markets.
Softbank may need to sell down its stake to increase liquidity.

Technical outlook:

Hard to fault ARM from this standpoint, over the year-to-date. It keeps making new highs, and the share price keeps on rising. It does look overbought on RSI 14 at a reading of 82.14, but it has been at higher readings before, and any pullback would allow the “buy the dip crowd” to get involved.
Given the limited free float and the news at the weekend, and today (01-06-2026), I think it’s more likely to be squeezed higher in the near term. Indeed, it’s up +15.00% in the pre-market as I type.

Fundamental outlook:

ARM is trading on ridiculous multiples, but many of those are based on the company it was historically and not what it could be going forward. For example, the trailing 12-month PE is 389.99 times, the price-to-book ratio is 42.75, and the price-to-sales ratio is 72.0 times. Against that, sales grew at +71.40% quarter over quarter.

It’s rated as a moderate buy among the 31 analysts who research the stock. They have a consensus price target of $360.00, way below the current levels. That may change, however, for example, Barclays has raised its price target on the name by $110.00 this morning. ARM will need to grow into its new persona and prove to the market that it is worth 10-bagger multiples.