Arm Holdings American Depositary Shares (ARM) Stock

Arm Holdings (ARM 2.89%) is one of the best-performing artificial intelligence (AI) stocks of the last year, trading up 119%.

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Arm Holdings operates under a distinctive licensing model, licensing its CPU architectures rather than manufacturing chips. This strategy delivers several key advantages: it provides a more predictable revenue stream based on royalties, it reduces capital expenditure, and it enables the company to concentrate on continuous innovation.

The sellers have not only overshot their targets but have done so at the worst possible time.

Arm Holdings benefits from strong AI spending, but sluggish smartphone shipments could hinder royalty revenue growth, impacting the stock's 71% YTD increase. Armv9 and CSS architectures are driving royalty revenue growth, but slower v9 adoption and smartphone market weakness are near-term challenges. Despite robust fundamentals and potential in AI data centers and automotive markets, Arm's stock is expected to remain range-bound until smartphone markets improve.

With Arm Holdings stock's recent downturn, let's assess whether the price drop presents a good buying opportunity.

This company plays an important role in the global chip market and recently delivered better-than-expected results.

While its fiscal Q2 results were mixed, its prospects remain bright.

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