3 Reasons Arm Holdings Is a Must-Buy for Long-Term Investors

Core Viewpoint - Arm Holdings has emerged as a leading AI stock following its IPO in September 2023, with its stock price tripling since then, indicating strong investor interest and potential in the AI sector [1][2]. Group 1: Strategic Partnerships and Projects - Arm is a key technology partner in the Stargate project, which aims to invest at least $100 billion in AI infrastructure, alongside major companies like Microsoft, Nvidia, Oracle, and OpenAI [3][4]. - Softbank, Arm's majority owner, plays a significant role in the tech industry and is also a financial partner in the Cristal Intelligence project in Japan, focusing on developing Advanced Enterprise AI [4]. - The Cristal Intelligence initiative emphasizes the need for AI agents that require substantial computing power, where Arm's power-efficient architecture is crucial for scaling [5]. Group 2: Market Position and Growth Opportunities - Arm has seen its market share in the cloud increase from 9$16 billion to $21 billion [8]. - The company is well-positioned to capitalize on the growing Edge AI market, which includes consumer devices like smartphones and robotics, leveraging its traditional strength in power-efficient chips [9]. Group 3: Unique Business Model and Revenue Potential - Arm's business model involves licensing technology and collecting royalties, leading to a revenue lag of two to three years, but royalties can continue for over a decade [10]. - Currently, half of Arm's royalty revenue comes from products launched over ten years ago, indicating a long-term revenue stream that will benefit from the ongoing AI revolution [11]. - Despite a modest revenue growth of 19% in the third quarter, Arm is expected to experience significant growth in the coming decade, particularly with new chips commanding higher royalty rates [12].