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(Bloomberg) — Arm Holdings soared again on Monday, with shares up nearly 100% after last week’s blockbuster earnings report showed spending on artificial intelligence was boosting sales. This extended the three-day rise.
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The company’s stock rose 29% on Monday, closing on record trading volume more than 10 times its average over the past three months. The rally has pushed the stock up more than 90% in three trading sessions since Arm’s results were announced after the market closed on Feb. 7.
“What we’re seeing here is an enthusiasm for anything that has to do with AI,” said Dennis Dick, a trader at Triple D Trading. “Argos are involved, retail traders are involved, people are buying options. It all just snowballs.”
Arm is benefiting from initiatives that go beyond smartphone technology, helping drive growth and profitability. The company last week expected March quarter sales of $850 million to $900 million, well above the average analyst estimate of $778 million. CEO Rene Haas said the opportunities presented by AI are still in their early stages.
Enthusiasm for the stock has led to remarkable trading activity, with much of the profit coming in just a few hours of trading. The stock peaked at nearly $127 within the first 36 minutes of trading on February 8, with most of the gains in the most recent session concentrated within the first 108 minutes of the day.
There is also hope that this rally could continue as traders continue to pay out options, particularly short-term calls to protect against further stock price increases. The most actively traded option was the $185 call expiring on Friday, with more than 54,000 contracts switching trades. In the end, each bottle sold for around $6. Based on the stock’s closing price of $148.97, the stock would need to rise an additional 28% by the end of the week to get any value at the end of the contract.
So far, the biggest beneficiary of AI’s demand for computing power is Nvidia Corp. The company’s stock more than tripled last year as sales and profits of so-called AI accelerator chips soared. Nvidia’s rally continued this year, with its stock up another 46% and its market capitalization briefly surpassing that of Amazon.com.
Arm and NVIDIA were once scheduled to merge as part of a $40 billion deal announced in September 2020, but ultimately scrapped the plan. The merger faced opposition from the start, with Arm’s own customers scorning the idea and regulators vowing to closely monitor it.
Arm’s stock has nearly tripled since going public in September, and its market capitalization now exceeds $150 billion, making it worth more than Boeing Co. or AT&T Co. The Cambridge, UK-based company remains 90% owned by SoftBank Group. Corp. acquired the business in 2016 for $32 billion.
“It’s getting to the point where it’s going parabolic, which means a lot of market capitalization is going to be thrown at it because it was a pretty big company to begin with,” Dick said.
–With assistance from Ian King, Ryan Vlastelica, and David Marino.
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