TLDR
- Coatue Management’s Philippe Laffont sold 89% of AMD holdings to invest in Arm Holdings stock
- Laffont forecasts Arm could grow from $179 billion to $787 billion market cap by 2030
- Arm stock surged 11% following OpenAI partnership announcement for custom data center chips
- Company’s royalty revenue grew 25% as enterprises adopt v9 chip architecture
- Wall Street analysts rate Arm as Strong Buy with average price target of $172.28
Philippe Laffont has made a dramatic portfolio shift at his hedge fund Coatue Management. The billionaire investor sold 89% of his Advanced Micro Devices stake to build a position in Arm Holdings. His fund outperformed the S&P 500 by 95 percentage points over three years ending in June.
Laffont built his AMD position in late 2022 and early 2023 as artificial intelligence gained mainstream attention. AMD became one of Coatue’s largest holdings. The selling started in mid-2023 and continued through recent quarters.
The timing wasn’t perfect. AMD stock has outperformed Nvidia since June after securing a major OpenAI deal. The agreement includes up to 6 gigawatts of GPU purchases over multiple years with share warrants included.
Why Laffont Chose Arm Holdings
Laffont projects Arm’s market capitalization could reach $787 billion by 2030. This represents 340% growth from its current $179 billion valuation. The projection reflects his long-term investment strategy.
Arm Holdings licenses chip architecture rather than manufacturing chips directly. Other companies build on top of Arm’s designs. The technology dominates smartphones due to superior energy efficiency.
The company now targets data centers where power consumption is becoming critical. Energy constraints could limit future data center expansion. Arm’s efficient designs address this challenge directly.
Enterprise adoption of Arm data center chips reached 70,000 companies in 2024. This marks a 14-fold increase since 2021. Nvidia incorporated Arm technology into its Grace CPU for server systems.
OpenAI Deal Drives Stock Rally
Arm stock jumped 11% after announcing its OpenAI collaboration. The companies will develop custom server processors for data center operations. OpenAI separately contracted Broadcom for AI-specific chip manufacturing.
Options traders showed bullish sentiment with 55,814 call contracts traded on Monday. This volume doubled the typical daily amount. The put-call ratio dropped to 0.14, indicating strong buying interest.
First quarter fiscal 2026 results delivered $1.05 billion revenue and $0.35 earnings per share. Royalty revenue increased 25% to $585 million. The v9 architecture commands higher royalty rates from licensees.
Qualcomm announced plans to use Arm’s v9 architecture in upcoming smartphone chips. The partnership adds to Arm’s growing list of major technology company relationships. These deals support the company’s revenue growth trajectory.
Wall Street Outlook and Valuation
Analysts issued 18 Buy ratings and three Hold ratings over the past three months. The consensus stands at Strong Buy. Average price targets sit at $172.28 with a range from $100 to $225.
Morgan Stanley maintains a $171 target while Evercore ISI holds at $178. Individual analyst projections vary based on different artificial intelligence market growth assumptions.
Arm trades at 260 times trailing earnings. This premium valuation reflects expectations for AI chip market expansion. The stock rallied 23% in two weeks, approaching its 52-week high of $182.88.
SoftBank Group owns the majority of Arm Holdings shares. The Japanese company has been securing financing backed by Arm stock. These funds support additional OpenAI investments, creating interconnected ownership interests.
The company reports second quarter fiscal 2026 earnings on November 5. Investors will focus on guidance updates and commentary about AI data center opportunities. The earnings call could provide insights into partnership progress with OpenAI and other major customers.
