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Arm Holdings plc (ARM): An AI Stock You Should Not Have Missed
Usman Kabir
Thu, Sep 5, 2024, 12:07 PM PDT5 min read
In this article:
We recently compiled a list of the AI News You Should Not Have Missed.In this article, we are going to take a look at where Arm Holdings plc (NASDAQ:ARM) stands against the other AI stocks.
Artificial intelligence (AI) is the new buzzword that is attracting the attention of almost everyone on Wall Street. The sector, characterized by rapid growth, significant investment, and intense competition, has witnessed a surge in venture capital (VC) funding over the past few months. In 2023, global VC investment in AI startups exceeded $94 billion. This surge in funding reflects the strong belief that these investors have in the transformative potential of AI across various industries. Merger and acquisition activity in the field is also on the rise, with more than 1,100 such deals in 2023 alone. Larger tech companies are actively acquiring AI startups to bolster their capabilities in the shortest time possible.
Some sector-specific numbers highlight the AI potential in minute detail. For example, in the healthcare universe, the AI healthcare market is projected to reach $102 billion by 2028, with startups focusing on diagnostics, drug discovery, and personalized medicine. In finance, AI-driven financial services are expected to reach a market value of $26.67 billion by 2026, with startups focusing on fintech, fraud detection, and algorithmic trading. In the retail world, AI is revolutionizing through personalized shopping experiences and supply chain optimization, with the sector projected to grow at a 34.4% CAGR by 2030.
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Read more about these developments by accessing 33 Most Important AI Companies You Should Pay Attention To and 20 Industrial Stocks Already Riding the AI Wave.
Hedge fund interest in AI has increased in the past few months, an indication of the long-term growth potential of the industry. During routine interviews with the media, investor conferences, and through their 13F activity, hedge fund managers have detailed their bullish views on AI. For example, Bill Ackman, the chief Pershing Square Capital Management, has said that AI startups represent the next frontier in technology, offering unparalleled opportunities for innovation. He adds that the key is finding those with a clear vision and the ability to execute in a rapidly evolving landscape.
Similarly, Ray Dalio of Bridgewater Associates is of the opinion that the impact of AI on industries is undeniable, and the startups driving this change are in a unique position to capitalize on it. Dalio adds, however, that it's crucial to invest in those that are building sustainable, ethical models, as they will be the long-term winners. Paul Tudor Jones of Tudor Investment Corporation believes that AI startups are not just about tech but about transforming entire industries. He notes that the challenge is in navigating the hype and identifying the true innovators who have the potential to disrupt established markets.
Read more about these developments by accessing Billionaire Stan Druckenmiller Is Betting On AI Infrastructure, Tobacco and Industrial Stocks and 10 Tech Stocks to Monitor Amid Market Volatility According to Bernstein Analyst.
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Our Methodology
For this article, we selected AI stocks based on the latest news and analyst ratings. These stocks are also popular among hedge funds. Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points ( see more details here).
A robotic arm holding a semiconductor chip, emphasizing the precision and quality of the company's production equipment.
Arm Holdings plc (NASDAQ: ARM)Number of Hedge Fund Holders: 38
Arm Holdings plc (NASDAQ:ARM) architects, develops, and licenses central processing unit products and related technologies for semiconductor companies and original equipment manufacturers. The company has grabbed the attention of AI investors with the development of CSS architecture for AI-enabled chips. This new design is already being adopted by major hyperscalers, who are customers of Arm, including tech giants like Microsoft, Oracle, and Amazon, among others. The new designs offer speed, reliability, and power reduction compared to previous iterations, and also present a significant growth opportunity that is expected to take the firm well beyond their smartphone-entrenched market.
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Wall Street has been following these developments related to Arm Holdings plc (NASDAQ:ARM) closely. Daiwa recently upgraded the stock to Outperform from Neutral with a $130 price target. In an investor note, the advisory stated that while the valuation of the firm was still high, the next 90 days would see Arm shares move back higher as fears of a recession recede and the Fed starts to cut rates.
Overall ARM ranks 11th on our list of the AI stocks you should not have missed. While we acknowledge the potential of ARM as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than ARM but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: Michael Burry Is Selling These Stocks and Jim Cramer is Recommending These Stocks.
Disclosure: None. This article is originally published at Insider Monkey.
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