Wall Street analysts predict contrasting trajectories for semiconductor giants Nvidia and Arm Holdings over the next year, despite both benefiting from the expanding artificial intelligence (AI) market.
According to Grand View Research, AI chip sales are projected to grow at an annual rate of 29% through 2030. Nvidia's stock has surged 166% year-to-date, while Arm's shares have increased by 100%.
Nvidia commands a dominant 98% market share in data center graphics processing units (GPUs), essential for AI applications. The company's revenue for the second quarter of fiscal 2025 reached $30 billion, a 122% increase, attributed to robust demand for AI chips and enterprise software.
CEO Jensen Huang highlighted the ongoing transformation of data centers from traditional computing to accelerated computing, estimating a $1 trillion modernization opportunity over the next four to five years.
In contrast, Arm specializes in CPU architectures, holding over 99% of the smartphone processor market. The company reported a 39% revenue increase to $939 million in the first quarter of fiscal 2025, driven by smartphone and cloud computing momentum.
While Nvidia's adjusted earnings are expected to grow at 35% annually through fiscal 2027, Arm's adjusted earnings are forecasted to rise by 27% during the same period. Analysts suggest that current valuations for Arm may appear excessive, leading to recommendations for investors to reassess their positions.