Arm Holdings has become the UK’s sixth most valuable company after the Cambridge-based chip designer saw its shares close almost 50% higher by the end of the day’s trading session in New York.
The Nasdaq-listed firm now has a market cap of $117 billion -- overtaking the likes of FTSE stalwarts Diageo, GSK and BP and within reach of surpassing the value of consumer giant Unilever, which has a market cap of $129 billion.
The tremendous rally in the stock on Thursday came on the back of investor enthusiasm over its third-quarter earnings, which beat analyst expectations by 8% to deliver revenues of $824 million, mainly due to both higher licensing and royalty payments and higher Arm China sales contributions, which increased from 20% to 25%.
Russ Mould, investment director at AJ Bell, said Arm’s “model of creating and licensing semiconductor designs rather than manufacturing chips meant it was able to grow fast without employing a lot of capital.
“These attributes still exist and are now being supercharged by AI, and that is reflected in the substantially higher royalty and licensing revenue being reported by the company.
“The nature of its business model should allow ARM to be flexible and capitalise on this opportunity. This is significant given the current boom in AI chips relative to more sluggish sales for traditional hardware used in areas like personal computing.”
The firm, which was bought by Japanese investment firm SoftBank in 2016 in a £24 billion deal, came close to being acquired by chip giant Nvidia in 2020 before the deal was blocked by regulators in the US and the UK.
Arm’s market value has more than doubled since shares in the firm began trading in New York in September at $51 per share, implying a market capitalisation of $52 billion.