TLDR
- Arm revealed its first internally produced chip, the AGI CPU, built for agentic AI workloads in data centers
- The chip was co-developed with Meta as the lead partner and customer
- Arm projects the chip will generate ~$15 billion in annual revenue within five years
- Raymond James upgraded ARM from Market Perform to Outperform with a $166 price target
- Arm lifted its earnings forecast to $3/share for FY2028 and $9/share for FY2031
Arm Holdings made a sharp turn from its traditional licensing model on Wednesday, announcing its first internally designed chip — the AGI CPU — built to handle the demands of agentic AI in data centers.
Arm Holdings plc American Depositary Shares, ARM
The chip marks a real departure for Arm. For years, the company made its money licensing chip designs to firms like Nvidia and Qualcomm and collecting royalties on units sold. This is something different.
Unlike standard chips built for chatbot queries, the AGI CPU is designed for “agentic AI” — systems that act on behalf of users with little human oversight. That’s a more demanding workload, and Arm says its chip handles it efficiently.
The AGI CPU is built on Neoverse V3 cores and features 96 lanes of PCIe Gen6 memory bandwidth plus CXL 3 memory expansion. Arm claims it delivers 2x the performance of high-end x86 CPUs in a rack configuration.
Meta is the chip’s lead partner and first customer. Meta plans to deploy the AGI CPU alongside its own custom MTIA accelerator.
CEO Rene Haas told Reuters the data-center chip alone is expected to bring in around $15 billion in annual revenue within five years. Total company revenue is projected to reach $25 billion in that same window.
Arm also updated its earnings forecast. It now targets $3 per share in FY2028, rising to $9 per share by FY2031.
Wall Street Reacts
Raymond James moved quickly, upgrading ARM from Market Perform to Outperform with a $166 price target. Analyst Simon Leopold said the shift into chip production was a strategy he had been pushing for since taking on coverage of the stock.
Leopold noted the move would drive strong operating profit and open a new revenue dimension for the company, though he had previously been unsure whether majority shareholder SoftBank would greenlight it.
HSBC also holds a Buy rating on ARM with a $205 target, citing Arm’s potential in the AI server CPU market. BofA kept a Neutral rating but raised its target to $140. Morgan Stanley maintained Overweight at $135.
InvestingPro data shows 19 analysts have revised earnings estimates upward for the coming period. The stock trades at a P/E ratio of 178.5, which InvestingPro’s Fair Value model flags as overvalued relative to fundamentals.
Spillover Into Rivals
The announcement gave a lift to other chip names. Intel rose 3.4% in premarket, and AMD gained more than 1%.
Citigroup analysts noted that Arm “has not taken a baby step” — it jumped straight into full chip development. They pointed to the industry’s move toward inference and agentic AI as the driving force behind growing demand for CPU horsepower.
Arm currently trades at 63x forward earnings estimates, compared to AMD at 26.6x and Intel at 71.3x, according to LSEG data.
Arm’s “Arm Everywhere” event is still ahead, where the company is expected to unveil additional details on its standalone merchant CPU strategy.
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