During the September 16 episode of Mad Money, host Jim Cramer discussed the recent pullback in Arm Holdings plc (NASDAQ:ARM) and shared his perspective on the stock trajectory, as he commented: The whole AI data center cohort peaked in June, then most of them bottomed near the end of July before rebounding like crazy. Some of the stocks are still off their highs. Arm Holdings, major chip design company, now also makes its own CPUs.
Stock went to $452 in June, now pulled back to just under $244. But I don't think you should look at it like that. I think you should look like this.
It doubled from the last time I saw... [Rene Haas]. People are worried about a self-imposed slowdown in the data center coming from the big frontier AI labs, which is why ARM got slammed on Monday, but I think we're looking at a multi-year chip shortage regardless… The Trust had a great position. We made so much money, candidly, then we took profits, and that was a big mistake.
Arm Holdings plc (NASDAQ:ARM) continues to extend its footprint well beyond its traditional mobile stronghold by capturing massive market share in server central processing units and advanced technology infrastructure. Financial results for the fiscal first quarter 2027 highlighted an explosive trajectory, with total revenue reaching $1.29 billion, representing a 22% increase compared to the same period in the prior year. Royalty revenue climbed 22% to $715 million, while licensing revenue rose 23% to $574 million.
Data-center royalties more than doubled as partners ramped up production of custom silicon built specifically for modern artificial intelligence environments, delivering a non-GAAP operating margin of 41% and generating $665 million in non-GAAP free cash flow during the quarter. Arm Holdings plc's (NASDAQ:ARM) Q2 FY27 is expected to be reported by November 4, with management expecting revenue of $1.38 billion with a $50 million margin of error. Non-GAAP operating expenses are expected to be around $780 million and non-GAAP fully diluted earnings per share are expected to be $0.47 with a $0.04 margin of error.
While the company's performance was exceptional, Arm Holdings plc (NASDAQ:ARM) experiences notable sensitivity whenever investors question the pace of capital spending by major artificial intelligence laboratories. Concerns regarding a potential deceleration in data center buildouts can trigger sharp selloffs, amplifying price swings for a stock trading at elevated valuation multiples well above traditional benchmark estimates. The stock currently trades at around 110x forward earnings.
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