1. ARM Holdings PLC (NASDAQ:ARM)
Revenue growth past 5 years: 17.71%
Number of hedge fund holders: 38
British semiconductor and software design company ARM Holdings PLC (NASDAQ:ARM) specializes in designing central processing unit (CPU) cores that implement the ARM architecture, which is widely used across various devices from smartphones to data centers. The company licenses its technology as intellectual property, enabling a vast ecosystem of partners to produce Arm-based processors.
With the rise of AI and increased smartphone usage, the semiconductor industry is experiencing a surge in demand. As a key player, ARM Holdings PLC (NASDAQ:ARM) commands a strategic position, which is evident through its collaborations with major tech companies. Arm has secured a significant contract with Meta to develop its chip, which marks a strategic shift from its traditional licensing model to direct chip production.
ARM Holdings PLC (NASDAQ:ARM) announced a 19% increase in revenue, reaching $983 million in Q3 2024, surpassing analyst expectations of $949.3 million. Net income for the same period rose to $252 million, an impressive increase of $87 million from the previous year.
ARM Holdings PLC (NASDAQ:ARM)’s revenue growth potential is further reflected by its projections for the coming years. Boosted by the demand for chips powering data centers and AI applications, the company expects revenue growth in the mid-20% range in the fiscal 2025. Financial analysts consider it as one of the best UK growth stocks because of its exposure to the generative AI megatrend and its leading ecosystem and pricing power. Arm’s impressive licensing performance, driven by growing AI workload demands, will continue to benefit the company.
Overall ARM Holdings PLC (NASDAQ:ARM) ranks first on our list of the best UK growth stocks. While we acknowledge the potential for ARM as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than ARM but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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