Arm Holdings PLC (NASDAQ: ARM) is seeing a stronger long-term growth outlook as rising artificial intelligence workloads drive surging demand for CPUs, prompting Jefferies to lift its price target to $320 from $290.
The semiconductor designer’s shares have climbed nearly 150% so far this year, with the stock trading at $272 on Monday afternoon.
Jefferies cited Arm’s expanded AI-related CPU opportunity following the company’s fiscal 2026 results, pointing to growing demand from agentic AI applications and new customer additions including Oracle and ByteDance.
The firm now projects Arm’s AI CPU revenue will reach $18 billion in fiscal 2031, exceeding the company’s own guidance of $15 billion.
Jefferies also raised its outlook for the total addressable CPU market, estimating it could reach $200 billion by 2030, up sharply from a prior estimate of more than $100 billion.
The analyst firm expects Arm’s AI CPUs to capture at least a 15% share of that expanded market, with Meta projected to become the company’s largest customer, followed by OpenAI, Oracle, and ByteDance.
Jefferies revised its AI CPU revenue estimates upward for fiscal 2028 and fiscal 2029, forecasting $1.5 billion and $3 billion respectively, compared with previous estimates of $1.4 billion and $2.7 billion.
The firm noted that Arm could expand production capacity through higher-cost wafer supply options, which may pressure gross margins but help the company secure a larger share of the growing AI chip market.
Data centers represent another significant growth avenue, with Jefferies noting that Arm’s compute subsystem-based royalties have increased to $1.50 per core, up from $1 previously, supporting stronger royalty revenue across Arm-based infrastructure.
Jefferies also flagged a potential AI accelerator launch from SoftBank using Arm’s design services as a future royalty opportunity, with royalties from such products potentially exceeding $7,000 per chip given high GPU average selling prices, though volumes remain difficult to predict.
The firm forecasts Arm’s revenue and earnings will grow at more than 40% annually through fiscal 2031, with a projected five-year earnings per share compound annual growth rate of 45%.
Jefferies wrote that the company’s growth visibility and exposure to AI-driven CPU demand could support outperformance relative to the broader semiconductor sector, with its revised price target based on a fiscal 2031 price-to-earnings multiple of 29 times, supported by discounted cash flow analysis.
