Chip designer Arm is prepping for a blockbuster IPO that could raise $10 billion. But beyond the flashy dollar signs, Arm’s offering will serve as a critical test of investor sentiment toward AI growth stories amid a turbulent market.
IPOs Slow as Rates Rise, But AI Still Intrigues
After booming IPO activity over the past several years, 2022 saw a significant pullback as interest rates rose and valuations declined. But Arm’s future role in AI computing could overcome investor sceptics.
Though Arm’s filing shows slowing revenue, its IP and architectures position it for a significant role in powering AI chips. Arm dominates mobile, but pivoting to the profitable data centre and server chips around AI workloads is critical.
If Arm draws strong interest, it signals investors still prize future AI potential over present-day troubles. That could open the floodgates for other late-stage startups to move forward with anticipated IPOs.
China Risks Loom, But Mobile Decline Drives Pivot
Arm does face real risks, especially around its fragile China joint venture. Payments have slowed, and operations have proven challenging to monitor.
But China’s increasing unpredictability is spurring Arm to expand beyond mobile into more stable growth. With the smartphone market maturing, selling advanced IP for servers and data centres offers a valuable new revenue stream.
Arm’s diverse customer base mitigates some geopolitical exposure. Above all, it must convince investors its restructuring and leadership changes put it on the right path.