I was quite surprised to see shares of Arm Holdings (NASDAQ:ARM) rocketing higher after the release of its AGI CPU. Indeed, perhaps the enthusiasm and euphoria were more to do with the “AGI” part of the naming than anything else. With shares starting to fluctuate wildly in both directions after the big spike, questions linger as to whether Arm has what it takes to gain the upper hand on its many customers, as it looks to become a frenemy of sorts, playing the role of a collaborator and a competitor. What’s most interesting is that Evercore ISI analyst Mark Lipacis noted that Arm “reminds him of Nvidia (NASDAQ:NVDA | NVDA Price Prediction).”
In many ways, the company’s dominance with its architecture (custom silicon makers are leaning quite heavily on the impressive Arm architecture) seems to rhyme with the wide economic moat enjoyed by the great Nvidia. Indeed, there’s still plenty of room for next-generation GPUS to run. Nvidia’s Vera Rubin is going to be a hot seller amid scorching AI demand and rising CapEx spend of the Magnificent Seven and beyond.
With $700 billion to be spent in CapEx this year across the biggest and brightest AI spenders, Nvidia seems well on its way to hitting the $1 trillion sales milestone it set for itself. While GPUs are still a great place to be, especially as the AI trade runs out of steam while Nvidia consolidates further, I do think that Mr. Lipacis is spot-on when he argues that “CPUs are having a moment.” He’s right and in a big-time way, as firms focus more on efficient inference and a bit less on energy-intensive training.
Could Arm become the Nvidia for AGI CPUs?
In essence, well-designed, highly-efficient CPUs tailored for very specific inference tasks (think agentic AI orchestration) seem to be where the industry is headed. Of course, time will tell if Arm Holdings really is about to have an “Nvidia moment” or an “Nvidia-like ascent” of sorts. Of all the fast-rising firms in big tech, Arm certainly stood out as one of the names that “rhymed” with an earlier form of Nvidia.
It has the market dominance, it has the visionary leadership, and, of course, Nvidia itself likely recognized this early on, which is why it wanted to pull the trigger to buy up the entire company just a few years ago. Could you imagine what Nvidia could have been today had it been successful with acquiring Arm? It’d be quite the force, to say the least.
In any case, the Nvidia comparisons, I think, are completely justified. But that doesn’t mean it will take the path of an Nvidia from a few years ago. There’s a lot of execution risk and, of course, it’s hard to tell if Arm can actually design a better chip than the likes of some heavyweight champs that might know its way around the Arm architecture better than Arm, at least for applications relevant to the firm itself. Take an Apple (NASDAQ:AAPL) for instance.
The company behind the M- and A-series chips knows how to design a chip that’s perfect for its own products. Very few firms can meld hardware, software, and services as well as Apple. And while Arm isn’t stepping on Apple’s turf (I think Arm would be outdone in consumer hardware), we could begin to see growing overlap as mega-cap tech goes after agentic AI chips.
Arm’s AGI CPUs are the real deal. Will big tech embrace the chips for the agentic wave?
AGI CPU, agentic-optimized chip, or whatever you want to call it, I do think that Arm is paving the way for many other firms as they look to get any efficient advantage possible, as inference chips look to take off. Meta Platforms (NASDAQ:META) has its own ambitious chip roadmap (look at their MTIA chips), but it’s still betting big on the future of Arm’s AGI CPU. The same goes with OpenAI, which is also putting some eggs in Arm’s basket.
Perhaps it’s wisest to diversify beyond one’s own chip designs for whatever the next chapter of AI entails. Given this, it’ll be interesting to see if Arm’s offering is powerful enough to convince the big spenders to hedge their bets by considering adding an Arm chip to the arsenal.
Any way you look at it, firms are looking to diversify beyond Nvidia. And with Arm, there’s another option to consider for the era of AI agents. While it might be a bit premature to view Arm as the “next Nvidia,” I do see where the bulls are coming from. If Arm gets its chips right, there’s no telling how much share of the mega-cap tech CapEx pie it can grab over the next decade.
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