Why Arm Holdings rallied again today

Semiconductor Architecture Company Shares Arm holds (ARM 6.32%) it rose again today, up another 5.4% as of 12:43 PM ET.

Arm has already seen a wave of analyst upgrades this week, but received even more positive news today, this time via an upbeat initiation from analysts at Raymond James.

An increase in AI in end markets

Raymond James began coverage on Arm today, initiating the stock with a buy rating and a $160 price target.

Analysts are bullish on Arm because of what they see as widespread adoption of the company’s V9 architecture. This new architecture is optimized for neural processing in artificial intelligence (AI) applications and is priced at twice the price of the previous generation architecture. So as AI penetrates more end markets, Arm should benefit greatly from V9 adoption.

AppleIts iPhone and Mac chips use the Arm architecture, and analysts believe the new iPhone 16 contains V9 to power the iPhone’s new Apple Intelligence services. In addition, Nvidia uses Arm for its Grace processor, which accompanies Nvidia’s Hopper and Blackwell GPUs in its “superchip” reference designs for AI data center servers.

Raymond James sees Arm making bigger inroads into the server market, particularly low-end AI servers, where Arm has traditionally had less penetration. As a cherry on top, analysts also predict that Arm will eventually license AI accelerators. Currently, Arm is only used in CPUs and not accelerators, so this could lead to material growth.

A lot of excitement is already in the price

Despite this potential upside, Raymond James’ price target is just $160, just 15% above the stock’s price to start the day and 8.2% above its price as of this writing.

That’s likely a function of the fact that Arm is already an expensive stock at 89 times 2025 earnings estimates to date. So while Arm’s outlook is bullish, there isn’t much margin of safety in buying the stock here.