ARM Surges 2% as Market Grapples with AI Chip War and Regulatory Shifts

Summary
• Arm Holdings (ARM) trades at $156.99, up 2.01% from its previous close of $153.90
• Intraday range spans $153.54 to $159.50, reflecting volatile AI sector dynamics
• Relative Strength Rating upgraded to 82, signaling renewed technical optimism

Arm Holdings has surged nearly 2% in a volatile session driven by AI sector turbulence and regulatory developments. The stock’s intraday swing from $153.54 to $159.50 underscores the market’s recalibration amid U.S.-China trade tensions and AI chip demand shifts. With the 21-day moving average regained, investors are recalibrating positions as the sector navigates post-DeepSeek uncertainty.

Relative Strength Rating Upgrade Fuels Optimism Amid AI Chip Sector Volatility
The 2.01% rally in ARM shares aligns with a recent upgrade in its Relative Strength Rating to 82, reflecting improved technical performance relative to peers. This comes amid a broader AI sector reset following the DeepSeek incident and Trump’s tariff reversal. While the sector grapples with U.S.-China trade dynamics and TSMC’s strategic shifts, ARM’s licensing model and design expertise position it as a beneficiary of sustained AI investment. The Zacks analysis highlights the market’s resilience, with ARM’s price action reclaiming key moving averages to signal intermediate-term strength.

Semiconductors Sector Mixed as Intel (INTC) Leads with 1.05% Intraday Gain
Capitalizing on Volatility: High-Leverage Calls and Gamma-Driven Plays
• MACD: 2.87 (bullish divergence), Signal Line: 4.31, RSI: 46.01 (neutral), Bollinger Bands: $139.25–$164.04
• 200D Avg: $135.86 (below current price), 30D Avg: $146.35 (supporting uptrend)

ARM’s technicals suggest a short-term bullish bias, with key resistance at $164.04 (upper Bollinger Band) and support at $151.65 (middle band). The 46.01 RSI indicates balanced momentum, while the MACD histogram’s negative value hints at potential consolidation. For options traders, two contracts stand out:

ARM20250725C150
• Call Option, Strike: $150, Expiry: 2025-07-25
• IV: 46.27%, Leverage: 17.46%, Delta: 0.7546, Theta: -0.7424, Gamma: 0.0276, Turnover: 247,204
• IV: moderate, Leverage: high, Delta: moderate, Theta: high decay, Gamma: strong sensitivity
• This call offers 17.46% leverage with a delta of 0.75, making it ideal for aggressive bullish bets. High gamma ensures price sensitivity, while turnover of 247,204 confirms liquidity. A 5% upside to $164.84 would yield a $14.84 payoff, amplifying returns.

ARM20250725C160
• Call Option, Strike: $160, Expiry: 2025-07-25
• IV: 46.66%, Leverage: 46.21%, Delta: 0.4219, Theta: -0.5618, Gamma: 0.03399, Turnover: 738,849
• IV: moderate, Leverage: high, Delta: moderate, Theta: strong decay, Gamma: very strong
• With 46.21% leverage and 0.03399 gamma, this contract benefits from volatility spikes. A 5% price move to $164.84 would generate a $4.84 payoff, ideal for capturing momentum. High turnover (738,849) ensures ease of entry/exit.

Action: Aggressive bulls should prioritize ARM20250725C150 for leveraged exposure to a potential breakout above $160. Traders seeking volatility sensitivity may pair ARM20250725C160 with a stop below $151.65 to manage risk.

Backtest Arm Holdings Stock Performance
ARM's performance after a 2% intraday surge shows mixed results in backtesting. While the stock tends to bounce back after a sharp drop, the overall gains are modest and may not be sufficient for significant profit accumulation. 1. Technical Analysis Perspective: - The stock’s BOLLINGER BANDS indicate an upper band at $165.19, a middle band at $150.48, and a lower band at $135.77, with the current price hovering near resistance. This suggests that aggressive traders should target the $135–140 support zone before retesting $150. - The MACD shows a RIS of 44.20, which is neutral, and a bearish crossover with the signal line, warning of a near-term pullback. This indicates a potential downside risk after the surge.2. Market Sentiment and Fundamentals: - The surge in ARM's stock price reflects broader semiconductor strength, with sector leader NVIDIA also showing optimism due to AI demand and regulatory shifts. - Analysts have raised average price targets to $135.86, with a consensus 'Outperform' rating, indicating a positive outlook.3. Institutional Activity: - Institutional buying, such as Dakota Wealth Management’s 61% stake increase, signals confidence in ARM’s growth trajectory. - Goldman Sachs initiated coverage with a Neutral rating and a $160 target, suggesting that the potential upside from ARM’s growing datacenter market share and higher royalty rates is already reflected in the current stock price.In conclusion, while ARM's performance after a 2% intraday surge may show initial optimism due to technical support and positive industry trends, backtesting suggests that the overall gains could be limited. Investors should consider these factors and their own risk tolerance when evaluating ARM as a long-term investment.

Position for AI Chip Resilience: Key Levels and Options to Watch
ARM’s 2% surge reflects its positioning as a beneficiary of AI sector resilience amid U.S.-China trade dynamics. The stock’s technicals—supported by a reclaimed 21-day moving average and moderate RSI—suggest a continuation of the uptrend. Intel (INTC) leads the sector with a 1.05% intraday gain, underscoring broad semiconductor optimism. Traders should monitor the $164.04 upper Bollinger Band and $151.65 support level. For those seeking leveraged exposure, ARM20250725C150 and ARM20250725C160 offer high gamma and liquidity to capitalize on near-term volatility. Act now: Buy ARM20250725C150 if $160 breaks, or consider a covered call strategy with ARM20250725C160 for volatility-driven gains.