Chip Maker Arm’s AI Revenue Poses Questions Despite Higher Valuation

Generative AI has been one of the most sought-after products by major tech giants. Recently, chip maker Arm Holdings saw its valuation surpass that of behemoth Nvidia. However, the market is currently posing questions about Arm’s prospects for AI revenue generation.

Arm Holdings’ AI revenue generation lags behind

Needham & Company managing director Charles Shi in an interview with Yahoo Finance expressed his concerns over Arm’s current revenue statistics. Shi says that Arm’s exposure to AI currently is quite small. The statement comes despite the British chip marker surpassing giant Nvidia’s valuation.

Big tech companies have greater exposure to AI products. With Arm’s relatively less inclusion of generative AI, the expectation of becoming an AI beneficiary to benefit and generate greater revenue has been pricing in.

Currently, the majority of publicly traded corporations are exposed to AI-related tools and integration in one way or another. But the majority of these businesses—including Google, Meta, and China’s Baidu—do not now rely significantly on generative artificial intelligence for revenue. However, sales and capital generation will change along with the market for these products. Tech giants expect increased sales, which means artificial intelligence-rated products will certainly account for a sizable portion of their revenue in the future.

Arm to still leverage AI revenue in the future

Bob O’Donnell, President and Chief Analyst at TECHnalysis Research in the same interview said that he is positive about Arm’s AI revenue trajectory. He adds that Nvidia previously wanted to buy Arm. however, could do that. This reflects the company’s market importance and signals that Arm’s peers have been keeping an eye on the firm’s potential, including that of generative AI.

Bob O’Donnell adds that arm has been very unappreciated among other Tech companies. The statement reflects correctly in the current tech scenario where big giants are also not leveraging their potential to mint good sources of money and customer base from artificial intelligence.  However, Bob anticipates a lot of opportunities for Arm, especially in the realm of AI in the future.

AI growth to remain positive in the future

Investors have long wagered on the AI revenue models of different businesses. This market trend saw tech stocks rally the previous fiscal year. As a result, the Nasdaq saw a meteoric rise that, according to CNBC, increased by 43% in 2023. For the tech-heavy index, this was one of the strongest gains in the last 20 years.

It is anticipated that artificial intelligence will impact financial markets more than stocks or businesses in the future. Currently, nations all around the world are pricing in money to support the production of more AI imports and exports. Between 2023 and 2030, the global artificial intelligence market is projected to expand at a compound annual growth rate (CAGR) of 37.3%. It is projected to reach $1,811.8 billion by 2030. China is expected to benefit from AI the most, according to Forbes. The GDP of the country will have grown by 26% by 2030, while North America’s GDP will rise by 14.5% as well. Together, these advantages will total $10.7 trillion, or over 70% of the global economic impact.