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Investors should scoop up shares of Arm Holdings after the company unveiled its first in-house central processing unit chip amid the artificial intelligence data center boom, according to Raymond James. The investment firm upgraded Arm to outperform from market perform. It also set a $166 price target on shares, suggesting 23% upside. “We upgrade Arm to Outperform following the company’s announced business model shift to include a fabless semiconductor element,” analyst Simon Leopold said Wednesday in a note. “In our assumption of coverage, we advocated for Arm to go down this path because it would yield strong operating profit, aid growth and add a new dimension to the strategy.” The upgrade comes after Arm debuted Tuesday its first in-house chip , AGI CPU 一 a critical element for powering artificial intelligence inference in data centers. Shares jumped 13% in premarket trading following the announcement. Arm is jumping into the central processing unit manufacturing fray as demand for AI data centers and their underlying hardware is booming. Hyperscalers Alphabet, Microsoft, Meta and Amazon, have committed a combined nearly $700 billion in capital expenses to build new AI data centers. API CPU, which was co-developed with Meta, will also fuel agentic AI applications, in addition to supporting inference workloads. That positions the chip for adoption by a wide variety of AI research and deployment firms, according to Raymond James. “AGI CPU was designed to address the unique requirements of agentic AI and inferencing workloads, use cases including accelerator management, agentic orchestration, increased networking and data plane compute power to support the AI data centers,” Raymond James’ Leopold wrote. He added, “the industry-leading bandwidth allows for more effective threads of execution per rack vs x86 CPUs, and Arm claims 2x the performance of x86 CPUs in its high-end reference configuration.” Meta, which has earmarked up to $135 billion on capital expenditures this year, has committed to multiple generations of the chip, the analyst noted. Other adopters include Cerebras, Cloudflare, F5, OpenAI, Positron, Rebellions, SAP and SK Telecom. Arm executives said Tuesday in an event in San Francisco that the firm could notch roughly $1 billion in incremental revenue from their new AGI CPU through the end of fiscal year 2028. And, those revenues could grow to $15 billion in fiscal year 2031, they said. Raymond James’ call is in line with consensus on the Street. Of the 40 analysts covering the stock, 24 have a buy or strong buy on shares. Shares have risen 23% since the beginning of the year, even as the broader market has underperformed.
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