Beyond Nvidia: Can Arm Stock Hit $210 Next Year?

Nvidia (NASDAQ:NVDA | NVDA Price Prediction) is a generational performer and the stock still has plenty of room to run, even as a $4.32 trillion company. Indeed, it’s probably just a matter of time before the GPU king cracks the $10 trillion market cap milestone. And while shares have minted many investors with significant gains in recent years, I do think that growth expectations have become high enough that it’ll take more than a good quarterly earnings report and upbeat guidance to move the needle by enough to keep up that blistering pace the firm has maintained over the past two years.

Undoubtedly, not only are some expecting a beat, but a surprising beat, perhaps to the magnitude of the one that Oracle (NYSE:ORCL) just posted.

While it is technically possible for Jensen Huang’s incredible AI chip juggernaut to post such incredible numbers that caught just about everyone, including the biggest Wall Street bull, by shock, I think investors may wish to consider what else is out there in the semiconductor scene because it’s these lesser-known up-and-comers that have more ground to gain relative to the likes of Nvidia and perhaps less in the way of expectations.

Arm Holdings: A sleepy high-growth semi play that’s overdue for another leg higher

In this piece, we’ll check in on Arm Holdings (NASDAQ:ARM), a British semiconductor company that’s seen its shares consolidate choppily for the past year and a half or so. The firm is best known for licensing its efficient semi architecture, which has a pretty steady royalty cash flow stream coming in. Undoubtedly, the business has proven to be very unique and quite lucrative. Indeed, it seems like every firm has the incentive to go down the Arm route these days. And it’s not just smartphones or PCs, but data centers and AI chips where Arm could expand its reach.

Undoubtedly, the licensing business is a terrific capital-light business that can really cash in on the current AI revolution. However, with the firm expanding into chip development, it seems like Arm is taking a big risk for a shot at a bigger chunk of the rapidly swelling semiconductor market. Of course, it’s really tough to gauge the margin impact as Arm gets its hand in chip-making while clashing with many of its partners. Though in-house chips could definitely complicate models over the medium term, I think it’s smart to evolve into a partner as well as rival in a bid to disrupt the semi scene as we know it.

With Arm’s hiring spree and the already-exceptional talent that made Arm’s architecture the modern-day success that it is, I certainly wouldn’t sleep on Arm as it hits the market with its newly announced Lumex platform, along with its C1 line of CPUs and G1 line of GPUs. It’s an interesting catalyst that could help Arm stock break out after a less-than-memorable past year. As to whether these new products can help Arm hit the ground running, though, remains another question entirely. 

Could Arm’s chip shift bring it all the way to $210 per share?

At the time of this writing, BNP Paribas’ David O’Connor has the Street-high $210 price target on shares of Arm Holdings. That entails a lofty gain of just north of 36% from Tuesday’s closing price. Indeed, a lot needs to go right for Arm to sustain such a breakout. Notably, Mr. O’Connor is upbeat about the firm’s push into ASICs. Add the work done for the “Stargate Project” into the equation, and perhaps it’s no mystery as to why the notable Wall Street bull views the British semi firm as cheap relative to its growth potential. 

Personally, I’m inclined to agree with O’Connor. Arm stock is a sleeper that could be one of the semis that leads the way next year, especially if C1 and G1 really hit the spot. As for the margin impact and potential cannibalization of business with its rivals, many question marks remain with Arm at this juncture.