Is Arm an AI meme stock, or are there other forces at play?
Feb. 14, 2024 6:31 AM ET
By: Yoel Minkoff, SA News Editor
 Bloomberg/Bloomberg via Getty Images
Big stock swings are in the spotlight as trading exuberance resurfaces, with much excitement returning to the markets over the past few months. Things have been magnified on a broader scale, with the Dow tumbling more than 500 points on Tuesday in response to slightly hotter inflation data, while single stock names have also drawn outsized attention for a whole host of reasons. Robinhood was quick to comment on the rebound in trading activity in its latest earnings, referencing a jump in monthly active users and accelerating deposits.
The ARM army? Some are cueing the old meme days of yesteryear as Arm Holdings (NASDAQ: ARM) goes on a rollercoaster ride that hasn't stopped yet. A blockbuster rally following earnings saw the stock skyrocket 100% in the past week alone, giving it a nearly 200% total return since its IPO in September. Trade with caution. After shares hit a new record high of $164, ARM tumbled nearly 20% to $120 on Tuesday before restarting the engines overnight to register a 7% premarket gain at the time of writing.
On a fundamental level, the latest catalysts for the British chip designer were a rosy outlook that boosted the entire semiconductor sector, as well as record revenues and a bottom line that exceeded expectations. AI was another magical word that helped trigger liftoff, with CEO Rene Haas noting, "it'll drive the need for more compute in a way that we've never seen before [and] we're just at the beginning." Note that there has also been significant short interest in ARM, creating the potential for squeezes, especially considering that Japan's SoftBank ( OTCPK:SFTBY) owns 90% of the company and there are not as many tradable shares outstanding. |
