What's Going On With Arm Holdings Stock Wednesday?

Arm Holdings Plc ARM shares are trading higher Wednesday in sympathy with Advanced Micro Devices, Inc. AMD, which jumped after reporting strong financial results for the second quarter.

What Happened With AMD: AMD reported second-quarter revenue of $5.835 billion, beating analyst estimates of $5.724 billion. The chipmaker reported adjusted earnings of 69 cents per share, beating analyst estimates of 68 cents per share.

"We delivered strong revenue and earnings growth in the second quarter driven by record Data Center segment revenue. Our AI business continued accelerating and we are well positioned to deliver strong revenue growth in the second half of the year led by demand for Instinct, EPYC and Ryzen processors," said Lisa Su, chair and CEO of AMD.

"The rapid advances in generative AI are driving demand for more compute in every market, creating significant growth opportunities as we deliver leadership AI solutions across our business."

AMD said it expects third-quarter revenue to be between $6.4 billion and $7 billion versus estimates of $6.61 billion. The company anticipates third-quarter gross margin of approximately 53.5%. AMD also said on its conference call that it expects GPU revenue to exceed $4.5 billion this year, up from its prior forecast of approximately $4 billion. 

AMD shares were up approximately 9% at the time of writing.

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Why It Matters: Several semiconductor names are moving higher alongside AMD as investors and analysts become more optimistic about chip earnings.

Arm is scheduled to report financial results for its fiscal first quarter after the market close on Wednesday. Analysts are looking for earnings of 34 cents per share and revenue of $902.691 million, according to estimates from Benzinga Pro.

Last quarter, Arm reported earnings of 36 cents per share and revenue of $928 million in its third quarter as a public company.

“This growth was driven by record royalty revenue as Armv9 adoption continues, especially in smartphones, server, and automotive markets. Revenue from licensing was also very strong, driven by multiple high-value agreements and the increased demand for Arm’s power-efficient technology for AI from data centers to edge computing," Arm CEO Rene Haas said at the time.

It’s worth noting that HSBC analyst Frank Lee on Monday downgraded Arm from a Hold rating to a Reduce rating, just days ahead of earnings.

What Else: Some chip stocks may also be getting a lift after Reuters reported that the Biden administration plans to propose a new rule next month that would expand the United States’ ability to stop foreign exports of semiconductor manufacturing equipment to Chinese chipmakers.

The report indicates that shipments from allies that export key chipmaking equipment, including Japan, the Netherlands and South Korea, will be excluded from the new rule, limiting its impact, according to sources familiar with the matter.

ARM Price Action: Arm shares were up 7.21% at $142.55 at the time of writing, according to Benzinga Pro.

Photo: Shutterstock.