Arm Version "Nvidia Moment" Is Coming? Morgan Stanley, Citi Praise Its Self-Developed CPU Strategy, $25 Billion Revenue Blueprint Recognized

Semiconductor design giant Arm Holdings (ARM.US) announced their foray into the physical chip manufacturing field at a strategic launch event in San Francisco, unveiling the Arm AGI CPU optimized for AI. This move led to a pre-market surge in their stock price of over 13%. This major strategic transformation aims to break through the growth bottleneck of the traditional IP licensing model by directly selling high-value hardware to capture the AI computing market dividend, expecting to drive the company's total revenue to $25 billion by the fiscal year 2031. With the support of core partners like Meta (META.US) and OpenAI, Arm is actively challenging Intel Corporation (INTC.US) and AMD (AMD.US) in the data center sector, garnering high praise from Wall Street research institutions for this stunning turnaround. In a report to clients, Royal Bank of Canada Capital Markets analyst Srini Pajuri wrote: "This strategy could bring significant revenue and earnings potential in the long term (with earnings per share exceeding $9 by fiscal year 2031), but it will also come with dilution of gross profit margins (chip business gross margin of 40%-50%, while intellectual property business gross margin is over 98%) and channel conflict issues. While debates about the business model may persist, we expect the stock's performance to primarily depend on the near-term fundamentals, which remain strong thanks to the inflection point of agent-based AI, growth in the data center market share, and favorable factors in CSS/V9 average selling price." Arm CEO Rene Haas predicted that the company's annual revenue would reach $25 billion by 2031 (with $15 billion coming from new CPUs), more than six times the revenue level in 2025. The company aims to capture around 15% of the $100 billion server CPU market and expects to achieve approximately $1 billion in revenue in the fiscal years 2027 and 2028. Morgan Stanley analyst Lee Simpson stated that Arm's focus on computing efficiency - with up to 136 V3 cores in their Arm AGI CPU, each providing 6 GB/s of memory bandwidth, latency below 100 nanoseconds, and power consumption of around 300 watts - can assist customers seeking low-power computing solutions, including companies like Meta (META.US) and OpenAI. "Therefore, this is not to replace NVIDIA Corporation's Grace or Vera chips, but to be used for head nodes (close to xPU) at companies like Cerebras, F5's network routing, and possibly even in enterprise environments for general-purpose CPUs," Simpson wrote in his report to clients. "Arm's strategy is being advanced through collaborations with cloud service providers, which are seeking to optimize overall ownership costs and reduce energy consumption, enabling them to allocate more power budget to GPU computing." Simpson has a "neutral" rating on Arm with a target price of $135. He also added that compared to Intel Corporation and AMD's products, Arm's AGI CPU may have some cost advantages. Evercore ISI analyst Mark Lipacis praised Arm even more enthusiastically, comparing them to the NVIDIA Corporation (NVDA) of a decade ago. He wrote, "Just as NVIDIA Corporation's GPUs perfectly aligned with the emerging artificial intelligence workloads a decade ago, Arm's CPUs, with their high energy-efficient architecture and high core count solutions, are perfectly aligned with the emerging intelligent world artificial intelligence workloads, making it the best 'orchestrator' of intelligent world workloads. Our industry research shows that Arm has quickly gained market share and become the preferred AI CPU for super-scale data centers. Arm estimates the current server CPU potential market size to be $500 billion, far surpassing AMD's $260 billion, and projecting growth to $1 trillion by 2031 - consistent with our research findings from a few months ago, indicating a much greater demand for data center CPUs than we previously expected." Citi analyst Andrew Gardner called this CPU release the "most significant transformation" in Arm's history. "While Arm's foray into chip manufacturing has been an open secret in the industry, we believe the breadth of this announcement is surprising: first, Arm has developed a complete server chip, the Arm AGI CPU, and is offering a full range of products through ODM partners; second, it has key AI release partners in Meta and OpenAI, as well as numerous other clients; and third, the achievement of $25 billion in revenue and $9 earnings per share by fiscal year 2031 (ending March 31), far exceeding the most optimistic expectations," Gardner wrote.