Arm Holdings Plummets 2.81% as Semiconductor Sector Reels: What’s Fueling the Selloff?

Summary
• Arm Holdings (ARM) trades at $138.54, down 2.81% intraday amid a volatile session.
• The stock’s 52-week high of $182.88 contrasts sharply with its current price, highlighting a 27.6% decline from peak.
• A DCF analysis from Simply Wall St suggests the stock is overvalued by 119.2%, raising red flags for investors.
• Sector peers like Nvidia (NVDA) also face headwinds, with a -3.32% intraday drop, signaling broader semiconductor sector jitters.

Arm Holdings’ sharp intraday decline has sparked urgent questions about its valuation and sector dynamics. With a 2.81% drop to $138.54, the stock is trading near its 52-week low of $80, raising concerns about sustainability. The semiconductor sector, already reeling from regulatory pressures and geopolitical tensions, is amplifying Arm’s struggles. This article dissects the catalysts behind the move, sector implications, and actionable strategies for traders.

Valuation Overhang and Sector-Wide Distrust Fuel Arm’s Slide
Arm’s intraday plunge is driven by a combination of overvaluation concerns and broader semiconductor sector pessimism. A DCF analysis from Simply Wall St estimates Arm’s intrinsic value at $64.17 per share, implying the stock is overvalued by 119.2% based on projected cash flows. This stark disconnect between fundamentals and market price has triggered profit-taking and short-term bearish sentiment. Compounding this, sector-wide regulatory scrutiny—particularly in China’s AI chip push and U.S. export restrictions—has eroded investor confidence. The PS ratio of 36.1x, while aligned with the company’s fair ratio, remains elevated compared to industry peers, further highlighting pricing risks.

Semiconductor Sector in Turmoil as Nvidia Leads the Retreat
The semiconductor sector is under pressure, with Nvidia (NVDA) down 3.32% intraday, reflecting broader concerns about AI demand and geopolitical tensions. China’s push for self-sufficiency in AI chips, coupled with U.S. export restrictions, has created a volatile environment. Arm’s struggles mirror this trend, as investors question whether its role in AI and cloud computing justifies its premium valuation. While companies like Micron (MU) and AMD show resilience, the sector’s mixed performance underscores the fragility of growth narratives in a high-risk, high-reward industry.

Navigating Arm’s Volatility: ETFs, Options, and Technical Signals
• MACD: -2.28 (Signal Line: -2.99, Histogram: +0.71) suggests bearish momentum.
• RSI: 56.51 (neutral territory, but below 60 indicates potential oversold conditions).
• Bollinger Bands: Price at $138.54 (Lower Band: $132.13, Middle: $138.41) signals proximity to support.
• 200-day MA: $135.71 (price below, indicating bearish bias).

Key Levels: The 200-day MA at $135.71 and Bollinger Lower Band at $132.13 are critical for near-term direction. A break below $132.13 could trigger a test of the 52-week low at $80. Conversely, a rebound above the 100-day MA ($134.60) may attract short-term buyers. The sector’s regulatory risks and valuation concerns suggest a cautious stance, but options traders can exploit volatility.

Top Options:
• ARM20250905P131 (Put): Strike $131, Expiry 2025-09-05, IV 39.79%, Leverage 203.97%, Delta -0.155, Theta -0.004674, Gamma 0.029179, Turnover 8,312. High leverage and moderate delta make this ideal for a 5% downside scenario (projected payoff: $7.37).
• ARM20250905C138 (Call): Strike $138, Expiry 2025-09-05, IV 36.34%, Leverage 40.79%, Delta 0.555, Theta -0.572, Gamma 0.052952, Turnover 38,236. Strong gamma and liquidity position this for a rebound above $138.41 (projected payoff: $0.37).

Action: Aggressive bears may target ARM20250905P131 if $132.13 breaks, while bulls should watch for a bounce above $138.41 to initiate ARM20250905C138.

Backtest Arm Holdings Stock Performance
Key take-aways 1. The back-test indicates that simply buying ARM after a −3 % (or worse) single-day drop and holding for up to five trading days has delivered persistently weak returns and large drawdowns during 2024-2025. 2. This suggests the sell-off is more often a sign of continued weakness than an attractive entry point; the pattern may require additional filters (e.g., volume capitulation, market context, or confirmation reversal) before it can be traded profitably. Important modelling assumptions you should be aware of • “Intraday plunge” was proxied with a daily close-to-close loss of −3 % or more because sub-daily (tick/1-min) data are not available in the current toolkit. • Default holding rule: exit after five trading days if no other risk control is triggered. • No stop-loss or take-profit levels were set, keeping the test focused on the timing logic itself. Feel free to let me know if you’d like to: • Tighten the definition of the plunge (e.g., use −5 % or include opening gaps). • Introduce risk controls (stop-loss, profit-target, max drawdown, etc.). • Benchmark the strategy against the Nasdaq-100 or customise any other parameters. Below is the interactive report for detailed results and drill-down.

Arm at Crossroads: Defend $132.13 or Face a Freefall
Arm’s intraday decline reflects a critical juncture for the stock. The DCF overvaluation and sector-wide regulatory pressures suggest a near-term bearish bias, but technical indicators hint at potential support near $132.13. Traders should monitor the 200-day MA and Bollinger Bands for directional clues. Meanwhile, Nvidia’s -3.32% move underscores the sector’s fragility. A decisive break below $132.13 could accelerate Arm’s descent toward its 52-week low, while a rebound above $138.41 may attract bargain hunters. Act now: Short-term bears target $131 with ARM20250905P131, while bulls watch for a $138.41 breakout.