After Arm's stock snapped its seven-day winning streak, it's on track for another sharp drop

By Hannah Pedone

Investors have been spooked by various matters linked back to OpenAI

Shares of Arm fell 8% on Monday and were primed to see a similar drop in Tuesday action.

Arm Holdings shares had been riding a wave of enthusiasm over the company's budding semiconductor efforts, but now investors are getting worried about a few developing trends.

For one, there are concerns that Arm may not play a role in a rival's potentially major chip venture, which weighed on the stock in Monday's trading action. Shares of Arm Holdings (ARM) closed that session down 8%, snapping a seven-day winning streak and posting their largest decline since October, according to Dow Jones Market Data. The stock also paced Nasdaq-100 decliners on the day.

Benchmark analyst Cody Acree told MarketWatch that the decline was "definitely" related to a report posted on the social-media platform X from TF International Securities analyst Ming-Chi Kuo, who said that Qualcomm (QCOM) is working with OpenAI to develop smartphone chips.

Read more: Qualcomm's stock soars as an AI opportunity emerges

While that report isn't confirmed, investors seem nervous about the unknowns, such as whether the chip design would be Arm-based or if it won't involve the company at all.

Arm declined to comment. Qualcomm did not respond to a request for comment.

Shares of Arm are on pace to fall further on Tuesday as investors digest a Wall Street Journal report indicating that the ChatGPT creator missed some financial targets. That seems to be pressuring stocks like Arm that are in the broader web of OpenAI partners.

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OpenAI didn't immediately return a MarketWatch request for comment.

Arm's Monday selloff already dovetailed with what Benchmark's Acree called a "broad-based correction" among "AI-levered companies." Shares of Broadcom (AVGO), Marvell Technology (MRVL), Advanced Micro Devices (AMD), Lumentum Holdings (LITE) and Coherent (COHR) all posted declines of between 1% and 5% on Monday.

Meanwhile, shares of Credo Technology Group Holding (CRDO) fell more than 7% and MaxLinear's stock (MXL) fell by twice that.

Arm's stock gained 19% in March and rallied another 43% in April, partly reflecting excitement over the company's announcement that it would develop its own central processing unit, a move that allows the company to expand its business beyond licensing and royalties for chip designs. A number of analysts have upgraded the stock in recent months.

Susquehanna analyst Christopher Rolland wrote in a Friday note that Arm's move to diversify its business beyond designing processors for smartphones, in addition to its CPU opportunities, bode well for the stock. He also believes, he wrote, that the company could capitalize on cloud trends and the automotive market.

Other analysts have expressed reservations. Morgan Stanley's Lee Simpson downgraded the stock earlier this month, saying that a major shortage of dynamic random-access memory chips could hurt the company's royalty business.

Britney Nguyen contributed.

-Hannah Pedone

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04-28-26 0844ET