Artificial intelligence stock Arm Holdings is Monday's pick for IBD 50 Growth Stocks To Watch. The Nvidia holding is climbing off the bottom of a deep base, although its chart shows a trendline entry.
U.K.-based Arm, which is majority-owned by Japan-based SoftBank Group, uses AI technology to develop advanced chip designs and software tools used in smartphones, autos and data centers.
Arm boasts it shipped more than 280 billion chips, and 70% of the world's population uses Arm-based products. Moreover, 99% of smartphones run on Arm-based processors.
Arm stock is tied with Nvidia stock for the No. 1 spot out of 39 companies in the electronics-semiconductor fabless group. The group ranks a stellar No. 3 out of the 197 IBD industry groups. Nvidia reported it owned over 1.9 million shares of Arm stock in a March U.S. Securities and Exchange Commission filing.
On Wednesday, Arm shares climbed 8.6% after activist investment firm Elliott Management acquired a position in Softbank worth more than $2 billion. Shares climbed another 3.2% in average volume Monday afternoon.
Arm Stock In Buy Zone
The AI stock is in a deep undefined base with an official 164 buy point, according to MarketSurge pattern recognition. But a trendline for ARM can be seen from the tops of Feb. 26 and March 26, giving an early entry around 132, with a 5% buy zone up to 138.60.
The chip stock extended a rebound after its earnings report was announced on May 8.
Profits Explode With Sunny Outlook
Arm topped fiscal fourth-quarter earnings and sales expectations and gave current quarter adjusted profit guidance that topped estimates. But its full-year sales forecast came up short of views.
FactSet's consensus estimate is for 43% profit growth in the current quarter, with a 34% expected rise in sales. Fiscal 2024 EPS is expected to increase 23%, then 29% in fiscal 2025.
On May 28, the AI stock popped 9% in heavy volume as chip stocks rallied and Rosenblatt reiterated a buy rating and a 180 price target on Arm. The stock reclaimed its 50-day moving average that day and continues to climb. Shares have gained around 83% this year thus far.
The AI stock made its trading debut on Sept. 14, 2023, with an initial offering price of $51 a share. It was the largest initial public offering of the year on the Nasdaq, at least at that time.
Arm holds pristine 99 IBD Composite and Earnings Per Share Ratings.
Follow Kimberley Koenig for more stock market news on X, the platform formerly known as Twitter, @IBD_KKoenig.
