Short Squeeze and AI FOMO Propel Arm Holdings Stock

by Warren Seah


Arm Holdings stock has become the center of attention in the financial world, experiencing an explosive rally over the last week. This surge in the chip designer’s shares has captured investors’ interest, with many wondering if it’s a result of a short squeeze, AI FOMO, or simply investing in a long-term technology winner.

The Rise and Pre-market Trading

Despite a 4.5% dip in premarket trading on Tuesday, Arm shares continue to showcase an impressive upward trend. Since the company’s earnings report last week, which revealed its growth in the field of artificial intelligence, the stock has more than doubled in value.

Outperforming AI Favorites

Arm’s recent rally has positioned it far above other AI favorites, such as Nvidia. The company’s forward price-to-earnings multiple, as of Monday’s close, reached approximately 102 times according to FactSet. This remarkable valuation has sparked speculation that short sellers are being compelled to cover their bets against Arm by purchasing its shares. However, this theory does not fully explain the substantial magnitude of the stock’s surge.

The IPO Lockup Period

Arm anticipates facing a significant test once the IPO lockup period concludes on March 12. This period prevents company insiders from selling shares and given that more than 90% of Arm is still owned by Japan’s SoftBank Group, the market is eager to see if there will be any significant changes in ownership dynamics.

Positive Outlook and Expert Opinion

Independent analyst Richard Windsor, who publishes Radio Free Mobile, suggests that as long as the AI bubble shows no signs of bursting, the market will view Arm more favorably, resembling its perception of Nvidia rather than Intel. This positive sentiment is expected to provide valuable support to Arm’s valuation.

OpenAI CEO’s Take on Killer Robots

In unrelated news, OpenAI CEO Sam Altman expressed his lack of concern regarding the threat posed by killer robots. He remains optimistic about the future of AI with a focus on its positive impact.

The Societal Implications of AI: A Closer Look

In a recent live video interview at the World Government Summit in Dubai, prominent tech figure Altman expressed his concern for the subtle societal misalignments that can occur with AI systems in society. Rather than focusing on the dramatic idea of “killer robots walking down the street,” Altman believes it is these unintended consequences that are more significant.

While expressing concern, Altman remains optimistic about the overall direction of AI and emphasizes the need for a global action plan to regulate the technology. Although not divulging details on reports of raising funds to boost global chip-building capacity, which could potentially impact his company’s relationship with financial backer Microsoft, Altman’s appearance at the Summit could increase the likelihood of funding from the U.A.E. government.

The promising future of chip manufacturing is also on the horizon, with Japanese company Tokyo Electron experiencing a 13% rise in local trading after raising its fiscal-year earnings forecasts. This upturn is attributed to increased spending on chip-making equipment.

However, there is a concern from an American perspective as Tokyo Electron reported that it is customers in China who are driving the demand for their products. While this primarily involves less advanced equipment, there are worries that Chinese chip makers may flood the market with more basic types of semiconductors.

Despite these potential challenges, investors still need to consider the impact of trade wars. Although they can currently set aside concerns about “killer robots,” the landscape of global trade remains uncertain.

Written by Adam Clark.

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