SoftBank’s Arm Stock Soars 25% as AI Chip Designer’s IPO Nets $65 Billion Valuation

Apparently fueled by AI hype, semiconductor technology company Arm Holdings had a sensational Nasdaq return on Thursday.

Jose Antonio Lanz4 min read

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Arm Holdings, the semiconductor technology company owned by Japanese giant SoftBank, made a strong return to the public markets on Thursday after an initial public offering (IPO) that raised over $5 billion for the company while ultimately valuing it at $65 billion.

Shares in Arm opened above the IPO price of $51 on the Nasdaq exchange, jumping to $56.10 in early trading. The sharp gain extends a hot streak for Arm, which last month secured a pre-IPO valuation of $54.5 billion.

By close, the shares were priced at $63.59, a nearly 25% jump over the IPO price. After-hours trading has pushed the price even higher since, currently at $64.70 per data from Yahoo Finance. Numerous media reports tied the much-anticipated IPO to recent market excitement over the future of artificial intelligence (AI).

The successful debut by Arm is welcome news for the IPO market after a lull caused by economic uncertainty. As reported by Reuters, several high-profile names like grocery delivery firm Instacart and German footwear brand Birkenstock are poised to go public in the coming weeks, and may be encouraged by investor appetite for Arm's comeback story.

An IPO marks a significant milestone for companies, allowing them to garner substantial capital and pave the way for further growth and expansion. Arm’s IPO is now the largest this year.

What’s more, it outperformed even the notable IPO of electric carmaker Rivian in 2021. Arm's IPO not only underscores its dominant position in the semiconductor industry, but also highlights its pivotal role in shaping the future of technology

This is Arm’s second IPO. The chip designer is returning to the public markets after being taken private by SoftBank in 2016 for $32 billion. Arm licenses processor technology used in the majority of smartphones globally, giving it an unmatched position in the semiconductor industry.

"We are elated to welcome Arm back on Nasdaq," said Nasdaq Global Head of Listings Karen Snow in an official statement. "As a company that is constantly questioning how to forge a better tomorrow, Arm aligns perfectly with our mission."

Arm generates revenue by licensing designs that partners adapt into customized chips, rather than manufacturing the chips directly. This enables wide adoption across electronics industries. Its latest home run is a long-running contract with Apple to let the tech giant use its technology for decades.

“We have entered into a new long-term agreement with Apple that extends beyond 2040, continuing our longstanding relationship of collaboration with Apple and Apple’s access to the Arm architecture,” the company said in a report to the SEC earlier this month.

The IPO comes after a failed acquisition attempt by Nvidia in 2020, which was blocked on antitrust grounds. While Arm has ambitious plans to push its technology into new areas like data centers and self-driving cars, the core smartphone market remains its crown jewel for now. Nvidia revealed its interest in investing in Arm’s IPO.

Looking ahead, Arm aims to extend its reach by venturing into new markets and fostering innovations in artificial intelligence (AI) and machine learning (ML) technologies. SoftBank CFO Yoshimitsu Goto said that Arm is "in the leading position of the artificial intelligence revolution that we have been strategically advancing."

"AI on Arm is literally everywhere—Arm CPUs already run AI and ML workloads in billions of devices, and we’re seeing it explode across customer applications and endpoints," said Will Abbey, Arm EVP and chief commercial officer.

Thursday's enthusiastic stock market reception shows investors think the company has a long runway for expansion—and once again reinforces expectations of the AI industry injecting trillions of dollars to the global economy in the coming years.