Chip companies have become the undisputed darling of Wall Street. This week, AMD and Arm both saw their stock prices soar after releasing strong financial reports. Nvidia's financial report has not been released yet, but its market value is almost close to Amazon.
On February 8th local time, ARM's US stock price surged 48% at the close of trading, with a market value exceeding $116 billion and an expected P/E ratio close to 90 times, more than twice that of Nvidia. Nvidia and AMD have P/E ratios of 33 times and 46 times, respectively.
Currently, SoftBank still holds about 90% of the issued shares of Arm, which means the value of the company's Arm shares has increased by over $34 billion in one day.
According to Arm's financial report, the revenue for the third quarter was 824 million US dollars, a year-on-year increase of 14%, and a net profit of 87 million US dollars. Arm expects its fourth quarter revenue to reach $850 million to $900 million. The company stated that due to the demand for artificial intelligence, it is exploring new markets and its main smartphone business is recovering from the downturn.
Arm's main business model is technology licensing. The company's financial report shows strong growth in patent licensing revenue, with Arm's licensing sales increasing by 18% to $354 million; The revenue from franchise fees increased by 11% to $470 million. Among them, Arm's latest instruction set, the ninth generation core chip architecture Arm v9, has made a significant contribution to the franchise fee, accounting for 15% of the company's franchise fee.
From Apple to Microsoft and Amazon, Arm's customers almost cover the entire technology industry. The company stated in an investor letter, "Arm continues to gain market share in growth markets such as cloud servers and cars, which is driving new royalty growth."
At present, AI chips are not Arm's main business. Although Arm has developed some AI chips, its technology mainly revolves around the CPU, which is different from Nvidia and AMD developing AI chips around GPUs.
However, Arm emphasized the synergy between its technology and GPU during the financial report conference call. Arm CEO Rene Hass mentioned Nvidia's Grace Hopper 200 chip during a conference call with analysts. He stated that the chip combines Nvidia's H100 chip with a CPU designed using Arm Neoverse architecture.
According to Arm's forecast for the current quarter's revenue, the company's annual growth rate is approximately 38%. In contrast, analysts predict that Nvidia's growth rate for this quarter and the next quarter will significantly increase by 200%; AMD's growth rate is expected to be even slower and will remain in single digits until the second half of this year.
SoftBank is the biggest beneficiary behind the surge in Arm's stock price. The company had sought to sell Arm to Nvidia for $40 billion, but the transaction was blocked. Now that Arm's market value has exceeded 100 billion US dollars after going public, it has also become the most important asset under SoftBank.
SoftBank announced on Thursday that its Vision Fund achieved a return of $4 billion in the most recent quarter. The company's CFO, Yoshimitsu Goto, also stated that Arm is the biggest contributor to the global development of artificial intelligence, and he referred to SoftBank's investment portfolio as a "AI centric investment portfolio.".