‘A Credible AI Play’: Arm’s New Chip Prompts an Upgrade at Needham

Chip designer Arm Holdings ARM +0.79% ▲ is starting to be seen as a “credible AI play,” according to investment firm Needham, which recently upgraded it to a Buy rating with a $200 price target. This comes right after Arm announced that it will build its own CPU, while still working with customers like Meta Platforms META -6.64% ▼ and OpenAI. It is worth noting that up until now, Needham had avoided the stock for about 2.5 years because Arm’s strategy looked risky.

Claim 30% Off TipRanks Premium

• Unlock hedge fund-level data and powerful investing tools for smarter, sharper decisions

• Stay ahead of the market with the latest news and analysis and maximize your portfolio’s potential

However, that view is now changing. Indeed, five-star analyst Charles Shi explained that Arm made several bold moves, such as raising royalty rates, expanding into subsystems, and now building its own silicon. At first, these moves looked like they could negatively disrupt the industry, which is why investors were cautious. However, those same decisions are now strengthening Arm’s position.

The timing of this shift is also important. As AI becomes more advanced, especially with the rise of agentic AI, CPUs are playing a bigger role in data centers than before. As a result, Arm is now better positioned to benefit directly from AI demand. Instead of just supporting other companies, it can capture more value itself. According to Needham, this combination of a stronger strategy, better positioning, and direct exposure to AI now makes Arm a serious AI stock.

Is ARM Stock a Good Buy?

Turning to Wall Street, analysts have a Strong Buy consensus rating on ARM stock based on 21 Buys, three Holds, and one Sell assigned in the past three months, as indicated by the graphic below. Furthermore, the average ARM price target of $174 per share implies 9.3% upside potential.

Disclaimer & DisclosureReport an Issue