ARM stock is priced like Nvidia but grows like Intel

Arm Holdings (ARM) has been pitched as one of the cornerstones of the AI boom.

Its CPU designs power nearly every smartphone on the planet, and its royalty-driven business model has long been seen as bulletproof. But investors are starting to look past the glossy margins.

After more than doubling from April lows — boosted by optimism tied to President Trump’s "Liberation Day" tariff announcement — ARM stock have since fallen nearly 20% from their late July peak.

The selloff began after lackluster earnings and a dismal forecast for the second quarter raised fresh doubts about just how much growth is really left.

The growth problem

On the surface, the company still looks invincible. Arm boasts 97% gross margins, near-universal adoption of its CPU blueprints, and a royalty model that’s often described as a tollbooth on the semiconductor industry.

But as Hataf Capital noted, the numbers don’t tell the full story.

Revenue is up just 12% year over year, with management guiding for flat results ahead. Nearly half of royalty revenues (45%) come from smartphones, which is a saturated market with limited growth prospects.

That leaves Arm tethered to a sector that no longer drives meaningful expansion.

Customer concentration adds another layer of risk. Qualcomm accounts for about 10% of Arm’s revenue, yet the two companies remain locked in licensing disputes. Any fracture in that relationship could hit Arm’s top line hard.

Even the enviable 97% gross margin comes with a caveat: rising costs have dragged operating margins down into the teens, far below the likes of Nvidia (NVDA), which investors continue to use as the gold standard for AI profitability.

Valuations stretched to the max

Despite all that, Arm trades at more than 200 times earnings, which is even more expensive than Nvidia.

Such a premium implies accelerating growth and expanding profitability. Instead, the company is offering sluggish revenue, rising costs, and legal headaches.

For Hataf, the conclusion is simple. Arm is priced like an emerging AI juggernaut but looks more like a mature business chained to slow-growth markets.

Hataf isn’t the only ARM bear on Wall Street. The American Association of Individual Investors (AAII) reports that Arm has suffered 18 analyst downgrades in the past month versus just one upgrade. AAII also slapped the stock with a failing value grade, bluntly calling it “ultra expensive.”

Much of the concern stems from ARM’s latest pivot.

As Reuters reported, management now plans to manufacture its own chips. That’s a U-turn from its licensing model and a move that risks alienating key customers like Apple and Qualcomm.

Execution risks are sky-high, and the shift raises more questions than answers.