Arm Stock Jumps as It Enters the Chip Market With IBM

TLDR

• IBM and Arm announced a strategic collaboration to develop dual-architecture hardware for AI and data-intensive enterprise workloads.
• Arm launched its first in-house data center chip, the AGI CPU — a 136-core processor built on TSMC’s 3nm process.
• ARM stock is up ~36% year-to-date; IBM trades at $241.49, sitting below its 20-day and 50-day moving averages.
• Arm’s management projects ~$15 billion in chip revenue and ~$25 billion in total revenue by fiscal 2031.
• Wall Street analysts give ARM a Strong Buy consensus, with an average 12-month price target of $174.68.

IBM (IBM) is trading at $241.49. Arm Holdings (ARM) is trading at $149.02.

International Business Machines Corporation, IBM

IBM and Arm announced a new strategic partnership Thursday, combining their strengths to build dual-architecture hardware for AI and data-heavy enterprise workloads. The deal pairs IBM’s security and reliability with Arm’s power-efficient chip designs.

The two companies will work on expanding virtualization support for Arm-based apps on IBM systems, boosting AI workload performance, and building a shared software ecosystem. The goal is more flexible and scalable computing infrastructure.

But the real headline this week belongs to Arm. At its “Arm Everywhere” event, the company formally stepped into the data center chip business with the launch of its first in-house CPU — a move that changes the Arm story in a big way.

The new chip, called the AGI CPU, is a 136-core processor built on TSMC’s 3nm process. It’s aimed squarely at AI-era compute workloads, and puts Arm in direct competition in a server CPU market that management expects to top $100 billion by 2030.

This is a notable pivot. For years, Arm’s model was simple: design the architecture, license it, collect royalties. Now the company wants to capture more of the hardware value chain itself.

From Licensor to Chip Seller

Management has set out an ambitious long-term framework: roughly $15 billion in chip revenue and around $25 billion in total revenue by fiscal 2031. Even if those targets prove aggressive, they signal how much larger the opportunity becomes when Arm sells silicon rather than just blueprints.

The timing makes sense. CPUs are playing a bigger role again inside large AI clusters — especially for inference, orchestration, and head-node workloads. Arm’s pitch is that its architecture wins where power efficiency matters, and that agentic AI only raises demand for that.

Meta is the lead customer and co-development partner for the AGI CPU. OpenAI, Cloudflare, and SAP are also listed among early engaged or committed customers. That early lineup lowhttps://coincentral.com/ibm-stock-quantum-computing-breakthrough-confirmed-in-landmark-simulation/ers the execution risk typically associated with a brand-new chip entering an established market.

The IBM partnership adds another layer. Rather than the AGI CPU replacing Arm’s royalty engine, the two appear to be running in parallel — Arm building chip revenue on top of an already healthy licensing business.

Financials and Analyst Views

Arm’s royalty revenue is projected to grow at around 20% annually over the next several years. The data center segment is on track to become Arm’s largest royalty business, fueled by Nvidia’s Grace and Vera CPUs, custom hyperscaler chips, and rising demand for AI networking hardware.

IBM, meanwhile, heads into its April 22 earnings update with analysts estimating EPS of $1.80 and revenue of $15.60 billion. The stock carries a Buy consensus with an average price target of $282.06, though recent target cuts from BMO Capital and JP Morgan reflect some near-term caution.

ARM stock trades at a P/E of around 130x — well above the sector median of roughly 30x. TipRanks data shows 21 Buy ratings, 3 Hold, and 1 Sell among Wall Street analysts, with an average 12-month price target of $174.68, implying about 17% upside from current levels.

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