Arm Holdings Plc shares fell on Monday after Bernstein initiated coverage of the newly listed chip designer, giving it an underperform rating and saying the company may not benefit from artificial intelligence as some investors expect. Arm fell 9.4% to $55.02 on Monday, the company's third trading day on the market, down from $56.10 when it opened on its first day of trading last Thursday. Bernstein's price target is $46, implying further downside.
"While expectations that Arm will be a beneficiary of AI developments may carry a premium, we believe it is too early to declare it an AI winner," analyst Sara Russo wrote. "As the mobile market matures, we believe revenue growth expectations are overly optimistic."
Bernstein is the third agency to give Arm a rating. Ratings are evenly distributed so far. In addition to Bernstein's equivalent of a sell rating, NewStreet Research recommends a buy and Needham has a hold rating. Needham analyst Charles Shi wrote that valuation "looks adequate."
Arm's decline on Monday was in sharp contrast to the overall sector's trend. The Philadelphia Semiconductor Index rose 0.7%. Among stocks with significant gains, Intel rose 1.2% and AMD rose 1.1%.