The stock has risen this year on the back of what Morningstar calls the 'AI buzzword' narrative — and could be at risk of a big decline.
Arm , the British semiconductor design company, has seen its share price skyrocket since reporting third-quarter earnings in February. The stock has risen by 65% this year, driven by what Morningstar calls the "AI buzzword" narrative and the company's ability to increase royalty fees after its latest chip architecture launch. Arm develops and designs the blueprints for microprocessors and counts companies like Nvidia and Apple as some of its biggest customers.
" Morningstar's price target for Arm, which the firm calls a fair value estimate, is $57 per share. This assumes a 17% annual growth rate over the next decade and a top-end profit margin of 44%. In contrast, the research firm believes the current share price implies a 22% revenue growth rate and a 55% operating profit margin.
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