Crazy surge of $218 billion! ARM (ARM.US) is already too expensive, Wall Street: Need to be wary of bubbles.

Since the American Depositary Receipt (ADR) was listed on the US stock exchange in 2023, the valuation of ARM (ARM.US) was already high, and in just a few weeks, the stock price nearly doubled, further pushing the company's valuation to historically rare levels. The ADR of this chip design company based in Cambridge, UK has been on fire all year, with a 277% increase in 2026, with the market bullish on the company's strategic plan to land its self-developed chips for the first time. Its increase in valuation lags behind only two companies in the S&P 500 component stocks, and ranks second in the Philadelphia Semiconductor Index component stocks. The current stock price surge began with a big drop on May 15th: on that day, there were reports that the US Federal Trade Commission was launching an antitrust investigation against ARM, and subsequently the company's ADR rose by 97%, increasing its market value by $218 billion. During the same period, the Philadelphia Semiconductor Index increased by about 20%, while the S&P 500 only rose by 2%, with ARM's increase significantly outperforming the market. Dave Mazza, CEO of Roundhill Investments, holds ARM depositary receipts and stated, "In our view, the company's fundamentals are solid, but the current valuation is the biggest concern. Investors' current buying prices are actually betting on the performance by 2030." The current dynamic price-earnings ratio of the company is over 175 times, compared to only 51 times at the beginning of the year; the price-to-sales ratio is even higher at 68 times. In terms of price-earnings ratio, ARM's valuation ranks second in the S&P 500, only behind Tesla, Inc., and Live Nation; in terms of price-to-sales ratio valuation, ARM ranks first in the entire market, with the second place Palantir having a price-to-sales ratio of only 37 times. Dennis Dick, Chief Trading Specialist at Triple D Trading, commented, "ARM's stock price has seriously diverged from its fundamentals, making it extremely difficult to trade. I would not enter the market at this stage." ARM's traditional revenue is highly dependent on the sluggish growth of the smartphone industry, but it is accelerating its entry into the high-growth AI computing data center track, planning to meet industry demand through self-developed chips. Mazza pointed out, "The current bull logic is entirely based on the company's business model transformation, and it is difficult to achieve substantial performance in the short term by 2026." The management of ARM has set a target: to achieve $15 billion in revenue from its self-developed chip business by the end of 2030. CEO Ren Haas expressed confidence in achieving the goal ahead of schedule in a TV interview on Tuesday. The company's total revenue for the 2026 fiscal year (ending March) was $4.9 billion, with institutions estimating revenue to increase to $6 billion next year and approach $8 billion in the 2028 fiscal year. Previously, NVIDIA Corporation (NVDA.US) CEO Huang Renxun boldly announced at the Taipei Computer Show (Computex) that its next-generation "Vera Rubin" next-generation AI platform has entered full production. The platform deeply integrates the new Rubin GPU with NVIDIA Corporation's self-developed "Vera CPU" based on the Arm architecture. At the event, Huang Renxun directly mentioned that OpenAI, Anthropic, SpaceX, and Oracle Corporation would be among the first core fans of this powerful Arm architecture chip. Despite the long-term growth logic supporting market optimism, the premise is that global tech giants continue to invest heavily in computing power infrastructure. Statistics show that institutions have raised their revenue expectations for ARM for the 2029 fiscal year by 22% over the past three months, but there has been virtually no upward adjustment in performance estimates for this year. Despite high valuations and long realization cycles, funds continue to flow into ARM. Dennis Dick said, "It is purely a trend market now. I have been in the industry for 27 years and have never seen such an extreme bullish sentiment, and once the trend starts, it is difficult to stop." ARM's unique business model is a key reason for the influx of funds: unlike traditional chip manufacturers, the company profits from IP licensing fees and terminal product licensing rights, with a gross margin exceeding 98% in the 2026 fiscal year. In comparison, NVIDIA Corporation has a gross margin of about 75%, and analysts unanimously expect ARM's gross margin to decline year by year, reaching 97.7% in the 2027 fiscal year, 92.2% in 2028, and 87.9% in 2029. Wall Street's views on ARM are divided: statistics show that out of 47 securities firms, 33 have a buy rating, only 2 have a sell rating, but the average target price of institutions is around $259, implying a potential 37% decline in the next 12 months. Mazza added, "The company itself is excellent, but from an investment perspective, the current stock price has reached a stage where we need to be cautious of a bubble."