Arm Holdings Dives 20% as High Rates, Valuation Disconnect Dampen Demand

The share price fell to its lowest level since December 2025 today, with an intraday decline of 1.19%.

Arm Holdings (ARM) has experienced a 20% drop in its stock price over the past three months, despite reporting double-digit revenue and net income growth. Analysts attribute the decline to macroeconomic pressures, particularly high interest rates that have dampened demand for growth stocks.

The semiconductor IP provider’s valuation is seen as overvalued, with a calculated fair value of $70—47% below its recent closing price of $113.29. This disconnect reflects investor concerns about reduced growth expectations, regulatory risks, and the pace of AI adoption.

The recent selloff highlights broader shifts in investor sentiment toward high-momentum tech stocks and a reassessment of earnings multiples. While Arm’s fundamentals remain robust, competitive pressures from open-source architectures like RISC-V and regulatory challenges in China are weighing on its valuation. However, potential catalysts—such as central bank rate cuts, accelerated AI infrastructure spending, or strategic partnerships—could reignite demand. For now, the stock’s trajectory underscores the delicate balance between near-term macroeconomic uncertainties and long-term sector growth prospects.