Is the software stock sell-off just a small-scale panic? Arm CEO: The market is mistaken about the situation

Due to Anthropic’s release of Claude Cowork, its powerful programming and computer task processing capabilities have caused investors to have significant doubts about companies operating in the office software sector, leading to a continued decline in software stocks.

However, Arm CEO Rene Haas stated that the recent market sell-off driven by concerns that “artificial intelligence will eat into software company revenues” is a small-scale panic and does not reflect the actual usage of these tools by enterprises.

He pointed out that, in terms of enterprise AI deployment, the market is still far from its proper level. Programming is not the most impactful application scenario, and he believes people may be misunderstanding many different things.

On Tuesday, Nvidia CEO Jensen Huang also said that it is unreasonable to sell software company stocks out of fear that AI disruptive technology will displace them. Software products are tools; AI will use these tools rather than reinvent them.

Surprise from Hot CPU Sales

Arm released its Q4 financial report on Wednesday, showing quarterly revenue of $1.242 billion, up 26% year-over-year, with an operating profit of $505 million, slightly below analysts’ expectations of $519.9 million.

However, the company’s licensing revenue did not meet expectations, and smartphone sales may weaken due to rising memory costs, which could impact future licensing fee income. As a result, Arm’s stock fell 7.48% after hours on Wednesday.

Arm also forecasted that CPU chip sales would bring ongoing “unexpected gains.” Haas pointed out that demand for CPU chips is exploding because tech giants like Nvidia, Amazon, and Microsoft consider CPUs critical for inference.

Arm focuses on CPU design, which is integrated into their own data center products by chip giants. He added that increasing the number of CPUs in chips is a trend, and as workloads evolve, different solutions will be found.

Additionally, Haas stated that Arm is expected to achieve the goal of surpassing smartphone business revenue with data center business revenue within a few years. For a company mainly known for its dominant technology in the smartphone field, this will be a significant transformation.

He also anticipates that, thanks to the booming development of AI, data center chips are expected to become Arm’s largest business, as the company can charge higher patent licensing fees for its new generation of chip designs. Patent licensing fees from data center chip sales increased 100% year-over-year, and Arm holds about 50% market share, competing with Intel and AMD’s x86 technology.

(Source: Cailian Press)