Arm Holdings Plummets 5.25%: What's Behind the Sudden Downturn?

Summary
• Arm Holdings (ARM) trades at $127.64, down 5.25% from its $134.71 previous close
• Intraday range spans $126.92 to $132.215, reflecting sharp volatility
• South Korea antitrust probe and sector-wide AI chip sector jitters dominate headlines

Arm Holdings faces a dramatic intraday selloff amid regulatory scrutiny and mixed market sentiment. Despite a record Q2 revenue growth of 34% driven by AI demand, the stock has been pressured by a South Korean antitrust investigation and broader semiconductor sector volatility. With the stock trading near its 52-week low of $80 and a dynamic P/E ratio of 183.86, investors are recalibrating expectations as technical indicators signal oversold conditions.

Regulatory Scrutiny and Market Volatility Weigh on ARM
The sharp decline in Arm Holdings stems from a confluence of factors. South Korea’s antitrust regulators have launched an investigation into Arm’s operations in Seoul, raising concerns about potential restrictions on its AI infrastructure partnerships. While the company reported record Q2 revenue of $1.14 billion driven by AI demand, the market has reacted cautiously to its deepened collaboration with Nvidia, fearing regulatory pushback. Additionally, broader semiconductor sector jitters—exacerbated by Intel’s -0.66% intraday decline—have amplified risk-off sentiment. The stock’s 52-week range of $80–$183.16 highlights its cyclical nature, but the current pullback reflects a tug-of-war between AI-driven optimism and regulatory uncertainty.

Semiconductor Sector Volatility: ARM Trails Behind Intel
The semiconductor sector remains in flux, with Arm Holdings underperforming its peers. Intel (INTC), the sector leader, has seen a modest -0.66% intraday decline, contrasting with ARM’s -5.25% drop. This divergence underscores ARM’s heightened sensitivity to regulatory risks and its reliance on AI-driven growth narratives. While Intel’s diversified chip portfolio offers more stability, Arm’s focus on AI infrastructure partnerships—particularly with Nvidia—has exposed it to sharper market swings. The sector’s mixed performance highlights diverging investor sentiment between established players and high-growth AI-focused firms.

Options and ETF Strategies Amid Volatility
• 200-day average: 138.66 (below) • RSI: 17.56 (oversold) • MACD: -7.52 (bearish) • Bollinger Bands: 123.11–179.33 • 30D Support: 165.45–166.39

Technical indicators suggest ARM is in a short-term bearish trend but trading near oversold territory. Key support levels at $123.11 (lower Bollinger Band) and $126.92 (intraday low) could trigger a rebound. A 5% downside scenario to $121.26 would test critical support, but the RSI’s 17.56 level implies potential for a short-term bounce. For options, two contracts stand out:

• ARM20251128P120 (Put, $120 strike, Nov 28 expiry):
- IV: 58.49% (moderate)
- LVR: 195.99% (high leverage)
- Delta: -0.155 (moderate sensitivity)
- Theta: -0.026 (slow decay)
- Gamma: 0.0306 (moderate sensitivity to price)
- Turnover: $22,687 (liquid)
- Payoff at $121.26: $1.26 per contract
- This put offers high leverage for a modest price drop, with decent liquidity and moderate time decay.

• ARM20251128P121 (Put, $121 strike, Nov 28 expiry):
- IV: 56.30% (moderate)
- LVR: 167.62% (high leverage)
- Delta: -0.181 (moderate sensitivity)
- Theta: -0.0065 (slow decay)
- Gamma: 0.0351 (moderate sensitivity to price)
- Turnover: $3,825 (liquid)
- Payoff at $121.26: $0.26 per contract
- This put is ideal for a shallow bearish move, with high leverage and minimal time decay.

If $123.11 breaks, ARM20251128P120 offers short-side potential. Aggressive bulls may consider a bounce above $126.92.

Backtest Arm Holdings Stock Performance
I attempted to identify every trading day since Arm’s IPO (Sept-2023) back to Jan-2022 on which the intraday low was ≥ 5 % below the prior-day close, and then run the event-backtest engine to measure the stock’s subsequent performance. • Price data retrieval and event-date extraction succeeded (files “ARM_price_data_2022_2025.json” and “ARM_intraday_minus5_events.json” were generated). • However, when the event back-test engine executed it returned a server-side error (“convert_statistics not defined / empty sequence”). This indicates that either (a) the engine hit an internal bug, or (b) the extracted event list was empty, giving the engine nothing to analyse.To move forward we have two practical options:1. Verify / inspect the extracted event list – We can fetch the event-date file and confirm whether any −5 % intraday plunges were actually found. – If the list is empty, we might lower the threshold (e.g., −4 % or −3 %) or limit the sample to the period after Arm’s IPO (20230914-present) to see if events appear.2. Re-run the analysis with an alternative method – If events do exist, we can bypass the event back-test engine and instead convert the date list into “buy on event date, sell X days later” signals and evaluate the strategy with the strategy_backtest engine (which is not affected by the current bug). – We would need to decide the exit rule (e.g., sell after 5 trading days, or on a fixed profit/stop-loss).Please let me know how you’d like to proceed:A. Inspect the event-date file to confirm how many (if any) −5 % plunges were detected. B. Try a different threshold (e.g., −4 % or −3 %). C. Define a simple holding rule (e.g., hold 5 days) and evaluate with the strategy back-test engine. D. Wait until the internal issue is resolved.Once you choose, I can execute the corresponding steps and deliver the results.

Act Now: ARM at Critical Crossroads
Arm Holdings faces a pivotal moment as regulatory scrutiny and sector volatility collide. While the stock’s 5.25% intraday drop has pushed it into oversold territory, the South Korean antitrust probe and Intel’s -0.66% decline highlight structural risks. Investors should monitor the $123.11 support level and the outcome of regulatory investigations. For now, the put options ARM20251128P120 and ARM20251128P121 offer strategic entry points for bearish bets, while a rebound above $126.92 could signal a short-term reversal. Watch for $123.11 breakdown or regulatory clarity—either could redefine the stock’s trajectory.