[ad_1]
Here are the takeaways from today’s Morning Brief. sign up Every morning you will receive the following message in your inbox:
Those who were waiting for the artificial intelligence bubble to burst were disappointed this earnings season.
In the latest sign that the AI craze is alive and well in the market, Arm Holdings (ARM) stock has soared 70% in the past five trading days after beating Wall Street profit expectations on February 7th. It rose more than that.
And perhaps most importantly, the chipmaker is crediting its better-than-expected revenue forecast to artificial intelligence.
“When you think about artificial general intelligence, it’s going to drive the need for more computing in a way we’ve never seen before,” Arm CEO Rene Haas said on the company’s earnings call. told investors. “The last few quarters have been strong, but we’re just getting started.”
Arm soared nearly 50% in next-day trading.
The stock briefly doubled its pre-earnings price before the market’s recent risk-on view waned following a better-than-expected inflation report. Arm shares fell nearly 20% on Tuesday as the broader market fell.
And while investors are buying into the potential gains, Wall Street is a little more cautious about how the disruptive technology will fully contribute to Arm’s earnings growth going forward.
Charles See, an analyst at Needham & Company, told Yahoo Finance Live that the company isn’t even sure Arm is that involved in the AI space, and that its current exposure to generative AI is “low.” It’s pretty small,” he said.
“Whether they can actually benefit from generative AI in the future remains to be seen,” Shi said.
This is also a common theme among other popular AI trades such as C3.ai (AI) and Palantir (PLTR). Wall Street wants to see more actual results, and investors just want to hear more mentions of AI.
As Shi pointed out, when a company introduces even a small amount of generative AI, investors get excited and valuations soar. Additionally, some Wall Street analysts have noted that only about 10% of Arm’s outstanding shares are publicly traded, with the rest controlled by SoftBank, so volatility can be expected in the company’s name. .
And this also highlights the fact that investors may only have a vague understanding of what these companies are doing. Arm is at the forefront of technology development, producing the instruction sets that help run chips made by Nvidia (NVDA), AMD (AMD), and nearly every other major industry player.
But the Arm stock story largely shows that investors are still following the familiar playbook of AI trading. One company surprised Wall Street’s expectations for future earnings and attributes the jump to disruptive technology.
This strategy dates back to May of last year, when NVIDIA announced revenue guidance that was about 53% above street expectations.
And since then, investors have only lowered the bar for what levels of AI promise they are willing to pay for.
For example, Arm expects sales to reach $850 million to $900 million this quarter, 16% above Wall Street’s estimate of $778 million. While the estimate hike is impressive, it falls short of Nvidia’s massive investment last May.
Yahoo Finance anchor Julie Hyman contributed reporting to this article.
Click here for the latest technology news impacting the stock market.
Read the latest financial and business news from Yahoo Finance
[ad_2]
Source link
