With the US Central Bank’s policy being quite accommodative, this advantageous backdrop has really set the platform for certain strategic tech companies to shine on the public markets.
In particular, chip stocks have been the darlings of the AI revolution and will continue to be in the limelight.
Part of this is about investors not knowing in particular what software firms will benefit from AI.
It is really a crapshoot to know how the software will look like in the future, but investors do know that software will be powered by the backend infrastructure which is why AI chips are fetching a premium at market in today’s stock market.
Once the software part of it starts to reveal itself, then it is highly likely the software winners will start to experience the same sort of price appreciation in shares that AI chip companies are experiencing right now.
That trend reversal is still years off so it is better to spend our energy on chip stocks.
The no-brainers are the likes of Nvidia and AMD, but the lineup is dee.
Look at the 2nd and 3rd tier of chip stocks like British chip company ARM (ARM).
Arm is also right in the mix of the AI boom. The positive market sentiment toward AI advancements continues to propel Arm's stock upwards. Furthermore, the company's former focus on low-power embedded and mobile chips is changing before your eyes. These days, you'll find Arm-based chips all over modern data centers and PC systems.
The broader market dynamics also played a role in Arm's rise. A softer-than-expected jobs report in May fueled hopes for potential interest rate cuts by the Federal Reserve, which would benefit growth stocks. The semiconductor sector is full of growth stories, including Arm.
Industry news also contributed to Arm's strong performance. Reports that Taiwan Semiconductor Manufacturing was investing in extreme ultraviolet lithography suggested a robust demand for next-generation chip technologies. As TSMC is a leading manufacturer of Arm-based chips, this investment indicated a positive outlook for Arm's future growth.
Arm's strategic positioning in the AI ecosystem highlights its potential for sustained growth. The company's advanced v9 architecture and its power-efficient processor platforms are increasingly interesting to major industry players, strengthening Arm's competitive edge in the semiconductor market.
ARM and its ticker symbol were added to the Nasdaq-100 Index on June 24.
This move guarantees more capital flow into ARM as it becomes part of a bigger ETF meaning pension and institutional money will own a piece of ARM and help the stock rise.
Arm's rapid inclusion in the index after an initial public offering last September reminds investors of its growing importance in the global technology ecosystem. As CEO Rene Haas highlighted in that announcement, this achievement validates Arm's business strategy and its critical role in providing foundational compute solutions for AI workloads.
Don’t forget that ARM agreed to be purchased by Nvidia which speaks volumes of what Nvidia believes about ARM.
Unfortunately for both, the deal was shut down due to regulatory issues, and imagines the future trajectory of ARM if that deal went through.
In the past 365 days, the stock is up over 200% and just looking at a 2024 chart, readers can understand how investors have complete belief in the future of ARM.
ARM will continue to maintain an important position in the future of AI and they are a juicy takeover target.
I do believe that AI stocks like ARM will continue to grind up, but we are inching closer to a point where investors will take profits before the next leg up.
