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11. Arm Holdings plc (NASDAQ:ARM)

Number of Hedge Fund Investors  in Q1 2024: 29

Arm Holdings plc (NASDAQ:ARM) is one of the most consequential semiconductor companies in the world. This is because its chip designs form the backbone of the smartphone and low power computing industries. An intellectual property firm, Arm Holdings plc (NASDAQ:ARM) designs chip cores and then sells them to companies such as Qualcomm and Samsung. They use these designs for their processors, GPUs, and other chips. The boom in data center computing over the past couple of years that has grown the demand for power efficient processors coupled with the advances in chip manufacturing in the form of smaller feature sizes have also allowed Arm Holdings plc (NASDAQ:ARM) to expand its business from mobile to enterprise and personal computing. This unlocks additional TAM for the firm, but the threat from open source chip designs such as RISC-V could translate into a significant headwind in the future.

Arm Holdings plc (NASDAQ:ARM)’s management shared its thoughts about the impact of AI on its revenue during the Q1 2025 earnings call:

“We had our fourth straight quarter of record results with 39% year-on-year revenue, which exceeded the high-end of the guidance. That was record license revenue, up 70% year-on-year, as companies continue to invest in Arm for AI everywhere. We also had strong royalty revenue, up 17% year-on-year, as the v9 adoption increases. Now our long-term growth drivers remain consistent. Every chip being designed today requires a CPU and these are being designed with Arm in mind with our strong tie into all the world’s software. Now that has driven significant royalty revenue growth. More value per chip, v9 up to 25% now royalty revenue overall, that’s up 20% from the previous quarter.

More importantly, our smartphone royalty revenue was up 50% year-on-year. That’s against a single digit increase in units. Now, we are seeing AI everywhere, which is driving demand for Arm’s performance and power-efficient compute platform. We had recent announcements in the last quarter of Google’s Axion Processor for the cloud, AWS Graviton4 general availability. We were very excited to see the announcement of the brand-new Windows on Arm PCs that run Copilot, True AI PCs, and we also announced the Arm Ethos-U85 for Edge AI. One of the significant strategies that we’ve been investing in has been compute subsystems. With our recent launch of CSS for client, we now have active CSS engagements in the major markets of mobile, laptop, cloud and automotive.”