Arm Holdings Positioned for Edge AI Growth, Analyst Says
- Morgan Stanley has highlighted Arm Holdings as a crucial player in the growth of edge AI technology.
- The semiconductor and software design company is expected to benefit significantly from increased investments in AI.
- This insight points toward a promising future for both Arm Holdings and the broader technology market.
Semiconductor manufacturer Arm Holdings is poised to play a significant role in the burgeoning field of "edge AI," according to a recent report from Morgan Stanley. Edge AI involves the deployment of artificial intelligence models and machine learning directly on local devices, such as sensors and Internet of Things (IoT) devices, rather than relying on cloud computing. Analyst Lee Simpson emphasized that this shift necessitates real-time processing and secure computing capabilities across various markets, positioning Arm favorably to capitalize on these developments. In light of these insights, Morgan Stanley upgraded Arm Holdings from an equal weight to an overweight rating, raising its price target from $107 to $190, which suggests a potential upside of 20% from the previous day's close. The analyst highlighted the expanding edge AI landscape, which presents opportunities for Arm in sectors including smartphones, automotive, and AI-enabled personal computers. Simpson noted that Arm is already well-established in creating custom chips tailored for edge AI applications, particularly in the mobile and automotive industries. He identified the automotive sector as a particularly lucrative opportunity, projecting that Arm's auto royalties could reach $1.1 billion by 2030. Additionally, he anticipates that Arm will capture 42% of the serviceable market for smartphone royalties by the fiscal year 2027. Arm's stock has seen remarkable growth, more than doubling in value this year, with shares rising an additional 2% on Friday, reflecting investor confidence in the company's strategic positioning within the edge AI market.