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Tariffs Knock Down Arm Stock. Should Investors Buy the Dip?
Arm Holdings (NASDAQ: ARM) spooked investors this week by declining to offer an outlook for fiscal 2026, which kicked off in April, along with its quarterly report. Arm cited uncertainty surrounding U.S. tariff policy for the cautious stance.Arm's intellectual property and technology are pervasive across the semiconductor industry. Arm-based chips reign supreme in the smartphone, microcontroller, and embedded markets, and they're making inroads in PCs and servers as well. The explosion in artificial intelligence (AI) infrastructure spending is a boon, and increasing chip complexity, coupled with rising demand for custom chips, is pushing up royalty rates.While Arm has plenty of visibility into its licensing pipeline, the company can't predict end-market demand. Arm earns royalties for each device shipped that uses its technology, so the volume of Arm-powered devices is the main driver of royalty revenue. Arm generates higher royalties for more complex chips, like server CPUs, and lower royalties for simpler chips like microcontrollers.Continue reading
Arm Holdings (NASDAQ: ARM) spooked investors this week by declining to offer an outlook for fiscal 2026, which kicked off in April, along with its quarterly report. Arm cited uncertainty surrounding U.S. tariff policy for the cautious stance.
Arm's intellectual property and technology are pervasive across the semiconductor industry. Arm-based chips reign supreme in the smartphone, microcontroller, and embedded markets, and they're making inroads in PCs and servers as well. The explosion in artificial intelligence (AI) infrastructure spending is a boon, and increasing chip complexity, coupled with rising demand for custom chips, is pushing up royalty rates.
While Arm has plenty of visibility into its licensing pipeline, the company can't predict end-market demand. Arm earns royalties for each device shipped that uses its technology, so the volume of Arm-powered devices is the main driver of royalty revenue. Arm generates higher royalties for more complex chips, like server CPUs, and lower royalties for simpler chips like microcontrollers.
