Arm Holdings Plc (NASDAQ:ARM) shares dropped sharply on Tuesday as weakness in AI-linked chip stocks intensified amid concerns about demand and spending trends tied to OpenAI.
• ARM Holdings shares are sliding. Why is ARM stock dropping?
AI Demand Concerns Trigger Sell-Off
The stock tumbled on Tuesday, down 8.12%.
The slide is also tracking weakness in growth-heavy tech as the Nasdaq is lower.
Reportedly, OpenAI is missing internal targets for revenue and new users, pushing executives to prioritize cost control.
At the same time, the board scrutinizes data-center deals and questions CEO Sam Altman’s push to secure more computing power.
The same report flags high subscriber churn and notes OpenAI previously projected $2.5 billion in advertising revenue this year and $100 billion by 2030.
Spending Outlook Raises Supply Chain Questions
The report also says OpenAI has tempered some infrastructure ambitions, telling investors it now expects to spend roughly $600 billion on computing power through 2030.
That kind of spending discipline narrative can ripple across the AI supply chain, where investors are sensitive to any hint of demand normalization.
The PHLX Semiconductor Sector Index (SOX), comprising semiconductor stocks, is down close to 5% on Tuesday.
Arms’s semiconductor peers, NVIDIA Corp (NASDAQ:NVDA), Advanced Micro Devices, Inc (NASDAQ:AMD), Broadcom Inc (NASDAQ:AVGO), Intel Corp (NASDAQ:INTC) and Marvell Technology, Inc (NASDAQ:MRVL), slid on Tuesday.
The broader market is leaning defensive today, with the Nasdaq down 1.26% and the S&P 500 down 0.63%, while the Dow Industrial Average is slightly higher.
Technical Analysis
Arm is still in a powerful uptrend on longer timeframes, but Tuesday’s drop is hitting while momentum is stretched after the April run toward the 52-week high. The stock is trading 19.6% above its 20-day simple moving average (SMA), which points to strong near-term trend extension, and 52.9% above its 100-day SMA, which signals the intermediate trend has been very strong even after pullbacks.
The relative strength index (RSI), a momentum gauge, is 73.06 after entering overbought territory in April, a level that often signals sharper swings as buyers get crowded. RSI at 73.06 shows momentum is still elevated, but it also means the stock can react quickly to any wobble in the “AI demand” narrative.
- Key Resistance: N/A — No defined ceiling is flagged in the provided levels.
- Key Support: $161 — Area where buyers previously showed up, and a key “line in the sand” on pullbacks.
Earnings & Analyst Outlook
The countdown is on: Arm Holdings is set to report earnings on May 6 (confirmed).
- EPS Estimate: 54 cents (Down from 55 cents year-over-year)
- Revenue Estimate: $1.47 Billion (Up from $1.24 billion YoY)
- Valuation: P/E of 287.8x (Indicates premium valuation relative to peers)
Analyst Consensus & Recent Actions: The stock carries a Buy Rating with a consensus price target of $179.90. Recent analyst moves include:
- Susquehanna: Positive (Raises target to $210 on April 16)
- Goldman Sachs: Sell (Raises target to $125 on April 9)
- Morgan Stanley: Downgraded to Equal-Weight (Raises target to $150 on April 7)
Top ETF Exposure
- First Trust NASDAQ-100-Technology Sector Index Fund (NASDAQ:QTEC): 2.67% Weight
- First Trust NASDAQ-100 Equal Weighted Index Fund (NASDAQ:QQEW): 2.38% Weight
- REX AI Equity Premium Income ETF (NASDAQ:AIPI): 4.74% Weight
Significance: Because Arm Holdings carries significant weight in these funds, any significant inflows or outflows will likely trigger automatic buying or selling of the stock.
ARM Price Action
ARM Stock Price Activity: Arm Holdings shares were down 8.12% at $198.35 at the time of publication on Tuesday, according to Benzinga Pro data.
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