Arm shares soared 20%. They were advised to buy them by analysts at Raymond James

Raymond James upgraded Arm Holdings to "outperform" ("above market," consistent with a "buy" recommendation), saying that Arm's launch of its own processor could significantly accelerate the company's growth and profitability amid the AI and data center boom.

Arm's shares soared more than 20% at the moment in trading on March 25, at the time of publication they are worth $161 per paper, thus adding 19.28% relative to the previous close.

Analysts at Raymond James upgraded their recommendation on shares of Arm Holdings to "outperform" from "market perform" and set their target price at $166 per share, which implies their upside potential of 23% relative to the close of trading on March 24.

"We are upgrading Arm to 'Outperform' following the announcement of the company's business model shift, which now includes chip manufacturing," CNBC quoted analyst Simon Leopold as saying in a note. "We have long believed that this move would provide Arm with strong operating margins, support growth and expand the company's strategy," the analysts pointed out.

"[The company's new AGI CPU chip] is designed to address the requirements of agent AI and AI utilization - including chip management and advanced network computing," Leopold also noted. According to him, the architecture of this chip provides performance advantages: "Arm claims twice the performance advantage over x86-based CPUs (Intel and AMD use them. - Oninvest note)," he wrote.

The upgrade in Arm's stock followed the company, which has made a name for itself by licensing technology from semiconductor manufacturers, unveiled its first proprietary processor, the AGI CPU, designed for AI datacenter tasks on March 24. The company's chip was co-developed with Meta Platforms. Shares of Arm rose more than 20% in trading on March 25 against this backdrop.

Raymond James' recommendation is broadly in line with Wall Street's consensus on Arm securities, MarketWatch data show: of the 52 analysts monitoring the company's securities, 27 advise buying Arm securities, 13 take a neutral stance (a "hold" recommendation) and two analysts advise selling Arm shares.

The launch of AGI CPU production means Arm Holdings will enter the $100 billion-plus commercial CPU market, with revenue from the product that could reach up to $15 billion by fiscal 2031, Investing quoted Wolfe Research analyst Chris Caso as saying.

Caso also raised its earnings forecast for the company, noting that Arm will "feel confident [in the market] with earnings per share (EPS) above $3 by fiscal 2028."

Raymond James and Wolfe Research believe that the growing demand for agency AI and Arm's expanding customer base point to a significantly larger long-term business potential for the company, writes Investing.

Arm CEO Rene Haas told Reuters in a March 25 interview that Arm expects the new chip to generate about $15 billion in revenue for the company by 2031.

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