Arm's stock nabs another upgrade. It's never been this loved by analysts.

By Hannah Pedone

The percentage of analysts holding bullish ratings on Arm's stock is now 70%, as enthusiasm builds for the company's new chip

Arm Holdings' stock has rallied more than 40% so far this year.

The bull camp around Arm Holdings' stock has never been bigger.

With Arm's (ARM) announcement on Tuesday that it is launching its own central processing unit, the company is officially expanding its business beyond licensing and royalty revenue associated with chip design.

Admittedly, the transition was "the worst-kept secret in Silicon Valley," according to Needham analyst Charles Shi, but it's one that's nonetheless giving Arm's stock more shine.

Shi upgraded Arm's stock to buy from hold on Thursday - following Raymond James analyst Simon Leopold, who turned bullish on Wednesday. And earlier this month, HSBC's Frank Lee double-upgraded the stock to buy from reduce, citing his enthusiasm around the expected business shift.

See also: Arm's stock could rocket 50% as Wall Street wakes up to a 'game-changing' trend, analyst says

With those upgrades, 70% of analysts now hold bullish ratings on Arm's stock, according to FactSet data. That's the highest percentage on record.

While the stock was down fractionally in Thursday trading, it was outperforming the Nasdaq Composite's COMP 2% decline on the day. And Arm shares are up 43% so far this year.

Shi is upbeat about Arm's ability to capitalize on a "CPU renaissance," given that data centers are fueling demand for this type of chip.

But it's not just that Arm is getting in on a hot market. Shi said that what's most important about the company's new chip bet is that Arm has real customer commitments from a number of companies including OpenAI, SAP (SAP), Cloudflare (NET) and, most notably, Meta Platforms (META).

One big concern for chip companies currently is that their customers increasingly may move to design their own chips. Google (GOOGL) (GOOG), for instance, has had success training models via its custom tensor processing units. Amazon uses its custom Trainium chips for training models as well.

Along those lines, there's risk that a big Arm customer like Meta could bring its chip design in-house. Shi noted that the Facebook parent company has its own design team, and that it recently acquired a chip startup Rivos - something Shi said is "not comforting" from Arm's perspective.

However, Shi thinks Meta's multiyear Arm deal offers some insulation. What's more, "designing your own silicon is just very hard," as evidenced by the fact that Amazon.com (AMZN) still partly relies on external design partners.

And Arm has proven the doubters wrong before. Shi previously worried about various royalty increases, but noted that Arm was able to positively surprise him with the results of those moves, as there was "little customer backlash."

"We believe that the silicon projects are about to surprise the market to the upside as well," he added, even though they risk pitting Arm against its own customers who currently license the company's chip designs.

Shi alluded to Mark Zuckerberg's words in the early days of Facebook, writing in his note to clients that "maybe a company taking risks and 'breaking things' is better than it being trapped in the pastime."

-Hannah Pedone

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03-26-26 1451ET