Arm Stock Rises on Accelerating AI Revenue, But a Big Risk Remains

Arm Holdings (NASDAQ: ARM) shares rose after the company -- which sells critical design architecture for making semiconductors -- saw artificial intelligence (AI) demand boost its revenue. The stock, however, has still lost about a third of its value over the past year and it faces a big potential risk next fiscal year. Let's see what that is -- and what investors should do.After an initial dip following its results, Arm shares rallied as investors turned their focus more toward its AI opportunities than worries about smartphones. Arm said it sees its data center business becoming its largest segment in the coming year, and that it will reach a 50% market share among top hyperscalers. This growth is being led by the shift toward inference and AI agents, which it says makes central processing units (CPUs) more important within the data center. However, the company did admit that increasing memory supply constraints could put a dent in smartphone sales, with talk of a potential 15% reduction in volumes over the next year. That said, it noted that even a 20% reduction would only equate to a 2% to 4% effect on its smartphone royalties. However, this company is trading at a growth multiple, so that is a big potential risk. Continue readingWeiter zum vollständigen Artikel bei MotleyFool Weiter zum vollständigen Artikel bei MotleyFool