Arm Holdings Shares Gain After HSBC Upgrade to Buy

Shares of Arm Holdings (NASDAQ: ARM) rose more than 3% intra-day Friday after HSBC upgraded the stock to Buy from Reduce and raised its price target to $205 from $90.

The firm said Arm is undergoing a structural shift from being primarily dependent on smartphone-related semiconductor IP to becoming a key beneficiary of demand for AI-driven server CPUs.

HSBC noted that the rise of agentic AI is expanding the total addressable market for server processors, which could drive stronger-than-expected unit growth.

The analyst also highlighted that all major hyperscalers are deploying Arm-based server CPUs and transitioning to the company’s v9 architecture and Neoverse Compute Subsystems, which effectively doubles royalty revenue per chip.

Additionally, HSBC believes Arm could enter the merchant CPU market, which could significantly enhance its revenue and earnings potential and potentially lead to a valuation re-rating.