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The logo of semiconductor design firm Arm on a chip.

Jakub Porzycki | Nurphoto | Getty Images

Exactly two years ago, Nvidia’s attempt to purchase chip designer Arm from SoftBank came to an end due to “significant regulatory challenges.”

Masayoshi Son, SoftBank’s billionaire founder, has never been so lucky.

That agreement would have involved selling Arm for $40 billion, or just $8 billion more than SoftBank paid in 2016. Instead, Arm went public last year, and the company is now worth over $116 billion after the stock soared 48% on Thursday.

SoftBank still owns roughly 90% of the outstanding stock, meaning its stake in Arm increased by over $34 billion in a day.

But the rally is somewhat confounding when looking at how the market values Arm. Wall Street may start to get a clearer sense of how much investors are willing to pay next month, when the 180-day lockup period expires and SoftBank will have its first opportunity to sell.

Analyst says Nvidia has 'significant amount of upside,' but gives his bear case

Chipmakers Nvidia and AMD have been Wall Street darlings of late due to their central position in the artificial intelligence boom. Nvidia makes the bulk of the processors used for cutting-edge AI models like those that power ChatGPT, while large tech companies have also indicated their interest in purchasing competitive chips from AMD as they hit the market.

But Arm is now being valued at a much higher earnings multiple than either of those companies. As of Thursday’s close, investors are valuing Arm at close to 90 times forward earnings. That compares to a forward price-to-earnings ratio of 33 for Nvidia and 46 for AMD, which both have significantly higher multiples than other major chip stocks like Intel and Qualcomm.

In reporting better-than-expected quarterly results on Wednesday, Arm gave investors some new data to suggest that its growth rate could persist through the next fiscal year. Arm said it was breaking into new markets thanks to AI demand, and that its primary market, smartphone technology, was recovering from a slump.

‘Gain market share’

Arm has a different business model than Nvidia and AMD in that it’s largely a technology licensing company. Arm said its royalties business, in which billions of chips manufactured each quarter result in a small fee to use the company’s architecture, was surprisingly strong. That’s because it can charge twice as much for its latest instruction set, called Arm v9, which accounted for 15% of the company’s royalties.

“Arm continues to gain market share in the growth markets of cloud servers and automotive which drive new streams of royalty growth,” the company said in its investor letter.

Arm’s revenue forecast for the current quarter points to 38% annual growth at the midpoint of the range, marking a significant acceleration from recent periods. But for Nvidia, analysts are expecting growth of over 200% for the January quarter and almost that level the next period.

AMD has been growing much slower and is expected to remain in the single digits until the back half of the year, when expansion is expected to accelerate.

Lisa Su, president and CEO of AMD, talks about the AMD EPYC processor during a keynote address at the 2019 CES in Las Vegas, Nevada, U.S., January 9, 2019. 

Steve Marcus | Reuters

While Arm has some AI chip development, its technology is oriented around the central processor, or CPU. AI chips are often graphics processors, or GPUs, which use a different approach to running multiple calculations at the same time.

Still, Arm says it stands to benefit from AI chips. CEO Rene Hass mentioned Nvidia’s Grace Hopper 200 chip, which will start shipping in finished systems in April, on a call with analysts. That chip combines one of Nvidia’s GPUs — an H100 — with a CPU that uses Arm’s Neoverse design.

“The drivers and direction of travel for Arm are as outlined at the time of its IPO, but the timing and slope is sooner and steeper due to AI.” wrote Citi analyst Andrew Gardiner in a note on Thursday. “Given we are in the very early innings of AI adoption, we expect Arm’s sales trends to remain robust into FY25/26.”

The company said that its backlog of expected licensing sales rose 42% on an annual basis to $2.4 billion.

For Son and SoftBank, the fortuitous scuttling of the Nvidia-Arm deal means an opportunity for the Japanese conglomerate to directly benefit from the growth in AI and the premium that Wall Street is placing on chip companies at the center of the action.

SoftBank on Thursday said its Vision Fund investment group logged a $4 billion gain in the latest quarter, after a brutal stretch of losses from bad bets like WeWork. SoftBank said in the December quarter that it booked an investment gain of $5.5 billion thanks to the Arm IPO.

If the stock can hold at these levels or even keep going up, more gains are in store.

“Arm is the biggest contributor to the global AI evolution,” SoftBank finance chief Yoshimitsu Goto said during an earnings presentation on Thursday. He even went so far as to call SoftBank’s investment pool an “AI-centric portfolio.”

— CNBC’s Arjun Kharpal contributed to this report

WATCH: CNBC’s full interview with Arm CEO Rene Haas

Watch CNBC's full interview with Arm Holdings CEO Rene Haas

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Apple’s 3-day loss in market cap swells to almost $640 billion

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Apple's 3-day loss in market cap swells to almost 0 billion

(L-R) Apple CEO Tim Cook, Vivek Ramaswamy and Secretary of Homeland Security Kristi Noem attend the inauguration ceremony before Donald Trump is sworn in as the 47th U.S. President in the U.S. Capitol Rotunda in Washington, D.C., on Jan. 20, 2025.

Saul Loeb | Afp | Getty Images

While the stock market broadly fared better on Monday than in the prior two trading days, Apple got hammered once again, losing 3.7%, as concerns mounted that the company will take a major hit from President Donald Trump’s tariffs.

The sell-off brings Apple’s three-day rout to 19%, a downdraft that has wiped out $638 billion in market cap.

Apple is one of the most exposed companies to a trade war, analyst say, due largely to its reliance on China, which is facing 54% tariffs. Although Apple has production in India, Vietnam and Thailand, those countries also face increased tariffs as part of Trump’s sweeping plan.

Among tech’s megacap companies, Apple is having the roughest stretch. On Monday, the only stocks to drop in that group of seven were Apple, Microsoft and Tesla.

The Nasdaq finished almost barely up on Monday after plummeting 10% last week, its worst performance in more than five years.

Analysts say Apple will likely either need to raise prices or eat additional tariff costs when the new duties come into effect. UBS analysts estimated on Monday that Apple’s highest-end iPhone could rise in price by about $350, or around 30%, from its current price of $1,199.

Barclays analyst Tim Long wrote that he expects Apple to raise prices, or the company could suffer as much as a 15% cut to earnings per share. Apple may also be able to rearrange its supply chain so that imports to the U.S. come from other countries with lower tariffs.

Apple declined to comment on the tariffs.

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Apple’s highest-end iPhone could see $350 price hike in U.S. on Trump tariffs, analyst predicts

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Apple's highest-end iPhone could see 0 price hike in U.S. on Trump tariffs, analyst predicts

A customer checks Apple’s latest iPhone 16 Plus (right) and Apple’s latest iPhone 16 Pro Max (left) series displayed for sale at Master Arts Shop in Srinagar, Jammu and Kashmir, on Sept. 26, 2024.

Firdous Nazir | Nurphoto | Getty Images

President Donald Trump’s reciprocal tariffs could lead Apple to raise the price of the iPhone 16 Pro Max by as much as $350 in the U.S., UBS analysts estimated Monday.

The iPhone 16 Pro Max is Apple’s highest-end iPhone on the market, and currently retails for $1,199. UBS is predicting a nearly 30% increase in retail price for units that were manufactured in China.

Apple’s $999 phone, the iPhone 16 Pro, could see a smaller $120 price increase, if the company has it manufactured in India, the UBS analysts wrote.

Shares of Apple have plummeted 20% over the past three trading days, wiping out nearly $640 billion in market cap, on concern that Trump’s tariffs will force the company to raise prices just as consumers are losing buying power.

“Based on the checks we have done at a company level, there is a lot of uncertainty about how the increased cost sharing will be done with suppliers, the extent to which costs can be passed on to end-customers, and the duration of tariffs,” UBS analyst Sundeep Gantori wrote in the note.

Apple, which does the majority of its manufacturing in China, is one of the most exposed companies to a trade war. China has a potential incoming 54% tariff rate — before new increases were proposed Monday. Smaller tariffs were also placed on secondary production locations, such as India, Vietnam and Thailand.

JPMorgan Chase analysts predicted last week that Apple could raise its prices 6% across the world to offset the U.S. tariffs. Barclays analyst Tim Long wrote that he expects Apple to raise prices, or it could suffer as much as a 15% cut to earnings per share.

If Apple were to relocate iPhone production to the U.S. — a move that most supply chain experts say is impossible — Wedbush’s Dan Ives predicts an iPhone could cost $3,500.

Morgan Stanley analysts on Friday said Apple could absorb additional tariff costs of about $34 billion annually. They wrote that although Apple has diversified its production in recent years to additional countries — so-called friendshoring — those countries could also end up with tariffs, reducing Apple’s flexibility.

After last week’s “reciprocal tariff announcement, there becomes very little differentiation in friend shoring vs. manufacturing in China — if the product is not made in the US, it will be subject to a hefty import tariff,” Morgan Stanley wrote.

Last week, the firm estimated that Apple may raise its prices across its product lines in the U.S. by 17% to 18%. Apple could also get exemptions from the U.S. government for its products.

WATCH: Apple plummets on Trump tariffs

Apple plummets on Trump tariffs: Here's what you need to know

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Elon Musk’s brother slams Trump tariffs, calls them ‘permanent tax on the American consumer’

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Elon Musk's brother slams Trump tariffs, calls them 'permanent tax on the American consumer'

Kimbal Musk, co-founder of The Kitchen Community, speaks during the annual Milken Institute Global Conference in Beverly Hills, California, May 3, 2016.

Patrick T. Fallon  | Bloomberg | Getty Images

Elon Musk’s younger brother, Kimbal, took to the social network X on Monday to lambaste President Donald Trump’s tariffs, calling them a “structural, permanent tax on the American consumer.” He also said Trump appears to be the “most high tax American President in generations.”

“Even if he is successful in bringing jobs on shore through the tariff tax, prices will remain high and the tax on consumption will remain the form of higher prices because we are simply not as good at making things,” Kimbal Musk wrote on X, one of the companies in his brother’s extensive portfolio.

The younger Musk owns a restaurant chain called The Kitchen, is a board member at Tesla and a former director at SpaceX and Chipotle. He has also co-founded and invested in other food and tech startups, including Square Roots, an indoor farming company, and Nova Sky Stories, a creator of drone light shows that he bought from Intel.

Elon Musk is a top advisor to Trump, overseeing the so-called Department of Government Efficiency, or DOGE, an effort to drastically cut federal spending, largely through layoffs, and consolidate or eliminate agencies and regulations. However, his relationship with some key figures in the Trump administration has been showing signs of strain in recent days as the president’s sweeping tariffs have led to a dramatic selloff in stocks, including for Tesla, which is down 42% this year and just wrapped up its worst quarter since 2022.

Over the weekend, Elon Musk took aim at Trump trade advisor Peter Navarro, disparaging his qualifications in a post on X.

“A PhD in Econ from Harvard is a bad thing, not a good thing,” Musk wrote, after Navarro told CNN on Saturday that “The market will find a bottom” and that the Dow will “hit 50,000 during Trump’s term.” It’s currently at about 38,200.

Musk also said that Navarro hasn’t built “sh—.” Navarro told CNBC on Monday that Musk is “not a car manufacturer” but rather a “car assembler,” dependent on parts from Japan, China and Taiwan.

Tesla was seeking a more moderate approach to trade and tariffs in a recent letter to the U.S. Trade Representative.

According to Federal Election Commission filings, Kimbal Musk this year has contributed funds to the Libertarian National Committee and Libertarian Party of Connecticut. In 2024, while his brother became the biggest financial backer and promoter of Trump, Kimbal donated to Unite America PAC, a group that markets itself as a “philanthropic venture fund that invests in nonpartisan election reform to foster a more representative and functional government.”

A representative for Kimbal Musk didn’t immediately respond to a request for comment.

WATCH: Tesla Q1 deliveries worse than expected

Tesla Q1 deliveries worse than expected

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