Arm Holdings stock received a fresh buy rating from a Wall Street analyst who sees the chip designer benefiting from the AI boom. Arm stock retook a key level on the news Friday.
Raymond James analyst Srini Pajjuri initiated coverage on Arm stock late Thursday with an outperform rating and a price target of 160.
On the stock market today, Arm stock jumped 5.9% to close at 147.37. With the advance, Arm climbed above its 50-day moving average line, a bullish sign, according to IBD MarketSurge charts.
"As the dominant supplier of energy-efficient processor/subsystems IP (intellectual property), Arm is well-positioned to benefit from rapid growth of GenAI (generative artificial intelligence) in the cloud and at the edge," Pajjuri said in a client note.
Arm is likely to increase its content in smartphones, plus gain ground in PC, data center and automotive markets, he said. Those gains should drive sustainable double-digit sales growth for the next several years, Pajjuri said.
Arm Stock Is On Two IBD Lists
The edge AI trend is fueling adoption of the Arm v9 architecture, which generates about twice the royalties of its prior version.
"We also see good possibility that Arm will eventually offer data center AI accelerator IP, which could significantly expand its SAM (serviceable addressable market)," Pajjuri said.
On Wednesday, Morgan Stanley analyst Lee Simpson named Arm stock a "new top pick." He rates Arm stock as overweight with a price target of 175.
Arm stock is on two IBD lists: IBD 50 and Tech Leaders.
Arm ranks fifth out of 39 stocks in IBD's fabless semiconductor industry group, according to IBD Stock Checkup. It has an IBD Composite Rating of 95 out of 99. IBD's Composite Rating combines five separate proprietary ratings into one easy-to-use rating. The best growth stocks have a Composite Rating of 90 or better.
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