Arm Holdings Plunges 13.46%—Is the Future of Chip Design in Peril?

Summary
• Arm shares nosedive 13.46% to $141.34, erasing a third of its year-to-date gains
• CEO Rene Haas hints at in-house chip development, rattling investor confidence
• Earnings forecast below expectations, with Q2 EPS range of $0.29–$0.37 vs. $0.35
• Semiconductors sector under pressure as Samsung and Intel also report declines

Arm Holdings, the UK-based chip design giant, has plunged more than 13% in volatile trading, driven by a muted profit outlook and strategic ambiguity. The stock’s sharp decline highlights growing investor unease as the company pivots toward chip development, a move that could disrupt its traditional licensing model. With the sector grappling with geopolitical tensions and slowing demand, the sell-off underscores the fragility of high-growth valuations in a cautious market.

Muted Guidance and Strategic Shifts Spark Investor Frenzy
Arm’s 13.46% intraday plunge was triggered by a dual blow: a Q2 earnings forecast below Wall Street expectations and a strategic pivot toward in-house chip development. The company projected adjusted EPS of $0.29–$0.37, missing the $0.35 consensus, while CEO Rene Haas hinted at building full chip solutions. This shift threatens Arm’s core licensing revenue model and has investors questioning cost structures and long-term profitability. Analysts from Needham and Wells Fargo have flagged the move as a ‘major leap’ with uncertain risks, compounding concerns about the stock’s stretched valuation.

Semiconductor Sector Volatility Intensifies as Arm’s Move Sparks Mixed Reactions
The broader semiconductor sector remains under pressure, with Intel (INTC) down 2.6% and Samsung reporting a 94% profit drop due to export controls. While Arm’s strategic ambiguity has amplified its sell-off, the sector’s struggles reflect broader challenges: China’s AI self-reliance drive, U.S.-China trade tensions, and softening demand for advanced chips. TSMC’s optimism about U.S. production contrasts with Arm’s turmoil, highlighting divergent strategies in a fragmented market.

Navigating Volatility: ETF and Options Plays for a Bearish Scenario
• Bollinger Bands: Upper $168.37, Middle $154.92, Lower $141.46 (Current price near lower band)
• RSI: 70.18 (Overbought, signaling potential reversal)
• MACD: 4.95 (Bullish momentum, but signal line at 4.54 suggests weakening)
• 200D MA: $136.78 (Price below key support level)
• Leverage Shares 2X Long ARM Daily ETF (ARMG) down 27%, reflecting amplified bearish sentiment

Key levels to watch: 141.46 (Bollinger Lower Band), 140.40 (200D support), and 139.11 (Intraday Low). A breakdown below $140 could trigger a test of $135, with the 200D MA acting as a critical floor. For aggressive short-term plays, consider the following options:

• ARM20250808P130 (Put, $130 strike, 2025-08-08 expiry)
- IV: 49.88% (Moderate volatility)
- LVR: 169.63% (High leverage for downside)
- Delta: -0.1421 (Slight bearish bias)
- Theta: -0.0363 (Decent time decay)
- Gamma: 0.0203 (Responsive to price swings)
- Turnover: $30,868 (High liquidity)
- Projected payoff: $20.84 (5% downside from $141.34)
- This contract balances leverage and liquidity, ideal for a 5–7% drop in the next 8 days.

• ARM20250808P133 (Put, $133 strike, 2025-08-08 expiry)
- IV: 45.82% (Stable volatility)
- LVR: 120.33% (Strong downside exposure)
- Delta: -0.1999 (Moderate bearish tilt)
- Theta: -0.0149 (Lower time decay)
- Gamma: 0.0276 (High sensitivity to price moves)
- Turnover: $16,381 (Solid liquidity)
- Projected payoff: $17.34 (5% downside from $141.34)
- Offers higher gamma for a potential sharp move below $133, with manageable time decay.

Aggressive bulls may consider ARM20250808C134 into a bounce above $139.11.

Backtest Arm Holdings Stock Performance
The ARM ETF has historically shown strong resilience following a significant intraday plunge of at least -13%. The backtest data reveals that the 3-day win rate is 60.19%, the 10-day win rate is 63.43%, and the 30-day win rate is 68.98%, indicating that the ETF tends to rebound over various short-to-medium-term horizons. The maximum return observed was 21.30% over 30 days, suggesting that while there may be some volatility, ARM has the potential for substantial gains in the period following a steep intraday decline.

Bullish Long-Term Outlook Amid Short-Term Turmoil—How to Position
While Arm’s short-term drop reflects strategic uncertainty and valuation pressures, its long-term AI-driven growth narrative remains intact. The stock’s 287.86x dynamic PE is unsustainable in the near term but could normalize as execution clarity emerges. Sector leaders like Intel (-2.6%) and TSMC’s U.S. expansion underscore mixed signals. Investors should monitor Arm’s 200D MA ($136.78) and 140.40 support level. For options traders, the P130 and P133 puts offer high leverage for a bearish scenario, while the sector’s AI tailwinds suggest a reentry opportunity for patient bulls. Watch for $135 breakdown or regulatory reaction.