On Monday, Morgan Stanley reaffirmed its positive stance on Arm Holdings (NASDAQ: NASDAQ:ARM), maintaining an Overweight rating and a $175.00 price target for the stock.
The firm's analysis updated its Risk Reward outlook in light of Arm Holdings' recent designation as a Top Pick in the European semiconductor sector.
The report highlighted the company's favorable position to capitalize on the shift towards edge AI, which involves large-scale efficient inference at the network's edge, and the increasing adoption of Armv9 architecture and custom silicon in mobile devices.
The investment firm's commentary underscored Arm Holdings' potential to benefit from the growing trend of edge AI technology. This move is expected to play a significant role in the company's future growth, as the technology enables more efficient data processing on local devices rather than relying on cloud-based solutions.
The use of Armv9 technology and custom silicon development, particularly in mobile technology, was also noted as a key driver for the company's continued success.
Furthermore, Morgan Stanley pointed out that the stock could see additional gains from exchange-traded fund (ETF) buying, as Arm Holdings is set to join the Nasdaq100 index in the fourth quarter of 2024. The inclusion in this prominent index often results in increased demand for a stock, as ETFs that track the index adjust their holdings to include the new entrant.
Arm Holdings' upcoming inclusion in the Nasdaq100 was highlighted as a potential catalyst for the stock's performance. As ETFs rebalance to incorporate Arm Holdings into their Nasdaq100 holdings, there could be a surge in buying activity, which may positively impact the stock's price.
In summary, Morgan Stanley's assessment of Arm Holdings reflects confidence in the company's strategic positioning within the technology sector, particularly in the burgeoning areas of edge AI and mobile silicon development. The firm anticipates that these factors, coupled with the stock's admission to the Nasdaq100, will contribute to Arm Holdings' positive trajectory in the market.
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