Arm's 13.44% Plunge and 310% Trading Surge Rank 28th as Strategic Chip Pivot Stirs AI Ambitions and Client Tensions

Arm Holdings (ARM) fell 13.44% on July 31, 2025, with a trading volume of $3.24 billion—a 310.97% surge from the prior day—ranking 28th in market activity. The decline followed a strategic shift as the company announced plans to develop its own chips, moving beyond its traditional licensing model for processor architecture. CEO Rene Haas emphasized accelerated R&D spending and exploration of full-end solutions, including chip or chiplet designs, to capitalize on AI and data center demand.

The strategic pivot comes amid a weaker-than-expected earnings report. Q2 revenue rose 12% year-on-year to $1.05 billion but fell short of analyst forecasts. Royalty revenue increased 25% to $585 million, while licensing revenue dipped 1% to $468 million. The company also guided for lower-than-expected revenue and earnings per share in the current quarter, signaling near-term challenges.

Arm’s move into chip design risks complicating relationships with major clients like Apple, Samsung, and Nvidia, which rely on its architecture for custom silicon. Competing directly in AI and cloud computing could strain these partnerships. SoftBank, the Japanese conglomerate controlling 99% of Arm, has positioned the firm as a cornerstone of its AI strategy, supporting initiatives like the $500 billion Stargate data center project. However, transitioning from a low-overhead licensing model to capital-intensive chip production introduces execution risks and operational complexity.

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