The AI Infrastructure rally is not just about GPUs anymore. Investors are now extending their focus into other key aspects of the computing ecosystem that will power future AI deployments, including CPUs, networking, memory, and full racks. This shift is a significant contributor to the recent rise of Arm Holdings (ARM). Last week, Jefferies maintained a bullish outlook on the company amid strong first-quarter numbers reported by Nvidia (NVDA).
The market is no longer focused purely on short-term earnings. Instead, a structural change is unfolding, with Arm-based architectures set to dominate in future hyperscaler AI infrastructure. The launches of Nvidia's Vera CPU, Alphabet's (GOOGL) Axion architecture, Amazon's (AMZN) latest generation of Graviton processors, and Microsoft's (MSFT) Cobalt processor are all indicative of a much bigger trend. In other words, hyperscalers are aggressively migrating away from traditional x86-based systems to Arm-based chips better suited for AI.
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About Arm Holdings Stock
Arm is responsible for designing CPU architecture for some of the world's biggest technology companies. Based in Cambridge, United Kingdom, the company licenses CPU designs and instruction sets to leading semiconductor manufacturers and cloud providers. Today, its market capitalization is approximately $323 billion, as the market increasingly starts seeing Arm as one of the biggest beneficiaries of the AI infrastructure transition.
ARM stock recently experienced an unprecedented surge. Now trading near $315, shares have gained 215% from the 52-week low of $100.02. Moreover, ARM is up roughly 48% in the last five trading days and touching all-time highs. On a much weaker note, the S&P 500 Index ($SPX) has delivered far less impressive gains in comparison.
www.barchart.com At face value, it would appear ARM stock has reached incredibly aggressive valuation levels. Currently, the stock trades at a whopping forward price-to-earnings (P/E) ratio of 273 times and a price-to-sales (P/S) ratio of 64 times. However, investors seem more willing than ever to apply software-platform type valuations, with Arm's royalty business scaling without the necessity to manufacture new products.
Arm Holdings Beats on Earnings
Recently, Arm reported record Q4 and full-year fiscal 2026 results. Revenue increased to $1.49 billion for the quarter and $4.92 billion for the year. Moreover, the company delivered triple-digit top-line growth for the third year in a row since its initial public offering (IPO).
One thing is clear — royalty revenues remain the primary driver behind this success. For fiscal 2026, Arm recorded a record $2.61 billion in total royalty revenue, with growth driven by smartphones, Edge AI, Cloud AI, and data centers. Data center royalty revenue more than doubled year-over-year (YOY) as hyperscaler AI adoption of Arm-based CPU chips grew strongly.
However, perhaps the most exciting development came in the form of Arm's recently launched AGI CPU platform. During the “Arm Everywhere” conference in March, the company unveiled its first-ever production silicon for agentic AI systems. According to management, the platform can increase rack-level performance more than twofold compared to x86 while helping save up to $10 billion of capex per gigawatt for AI data centers.
Institutional investor enthusiasm increased further following the positive read-through from Jefferies in regard to Nvidia's Q1 results. Jefferies maintained a "Buy" rating and $290 price target on ARM stock, adding that Nvidia now has visibility of roughly $20 billion in sales this year for its Vera CPU design. Since Vera employs Arm-compatible CPU cores, analysts believe this will result in increased royalty revenues for Arm over time. Furthermore, according to Jefferies, Arm's long-term revenue target of $15 billion by 2031 for its AGI CPU business may actually prove to be “conservative” as CPU demand continues to grow due to agentic AI applications.
On top of all this progress, Arm's ecosystem continues to expand rapidly. Meta Platforms (META), OpenAI, Super Micro Computer (SMCI), Google Cloud, and Oracle (ORCL) have all joined Arm to accelerate their respective transitions to agentic AI.
What Do Analysts Expect for ARM Stock?
Overall, Wall Street remains bullish on ARM stock despite its huge recent rally with a consensus “Moderate Buy” rating. Analysts increasingly believe that Arm should be considered one of the key beneficiaries of the AI infrastructure transition, especially when it comes to CPU orchestrations alongside increasing inference demand and agentic AI adoption.
www.barchart.com On the date of publication, Yiannis Zourmpanos did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.