Arm's Nasdaq Ascent: Capitalizing on the AI Wave alongside Nvidia's Triumphs

Softbank Group Corp SFTBF SFTBY-owned chip designer, Arm Ltd, is prepping for a significant step in its journey. 

On Monday, the company will file for a Nasdaq IPO. The central inquiry on the minds of investors? Whether the firm will likely witness “exponential growth” due to the AI boom, as CEO Masayoshi Son suggests.

The tech mogul acquired Arm in 2016, portraying it as the cornerstone of SoftBank’s portfolio. In recent discussions, Son expressed confidence in Arm’s potential contribution to AI, Reuters reports. 

Arm, as Son detailed in June, serves as a nexus for AI-related firms, and an impressive “85% of SoftBank Group assets are AI-linked businesses abroad.”

Reportedly, Arm eyed a valuation of $60 billion - $70 billion in an IPO raising $8 billion - $10 billion. The target could be lower since SoftBank has decided to hold onto more of the company after buying Vision Fund’s stake.

Potential investors will scrutinize how the U.K. chip designer plans to diversify beyond its mobile-chip designs, which Apple Inc AAPL and Amazon.com Inc AMZN leveraged.

The enthusiastic CEO shared that he’s been intensely collaborating with AI-driven ChatGPT, conceiving hundreds of innovations, which he believes can materialize via Arm. 

However, Son’s claims have been sparse on specifics. Investors are looking for this forthcoming filing to shed light on SoftBank’s AI game plan and determine if Arm’s value aligns with, or perhaps exceeds, a pre-IPO estimate of $64 billion.

While Son’s optimism for Arm has been a recurrent theme, some analysts remain skeptical.

Despite his previous assertions that the Internet of Things (IoT) would revolutionize the world, with Arm-powered chips taking the lead, IoT currently comprises a minor segment of Arm’s earnings. 

Moreover, analysts like Kirk Boodry stress that Arm isn’t at the AI boom’s heart but exists more on its periphery.

In comparison, semiconductor giant Nvidia Corp NVDA has emerged as the prime beneficiary of the AI surge. Their high-end chips are the backbone for data centers operating large language models like ChatGPT. 

Arm, though, has a window of opportunity here. As Nvidia’s chips demand energy-efficient CPUs, a domain where Arm excels, there’s potential for collaboration. Still, Nvidia faces stiff competition, and not all its GPUs must incorporate an Arm CPU.

Rolf Bulk of New Street Research points out that Arm’s prospects may be rooted in AI and machine learning pivoting from centralized cloud servers to user-end devices like phones or household gadgets. 

These gadgets demand a specific intellectual property, a realm where Arm has previously showcased prowess.

Arm’s debut could spur dozens of startups like online grocery delivery company Instacart Inc and a breather for fee-starved investment bankers. There are at least 28 banks signed onto Arm’s IPO.

Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.