Key Points
Arm is strengthening its global supply chain network.
A lucrative opportunity to satisfy the world's growing need for data center processors awaits.
Shares of Arm Holdings (NASDAQ: ARM) jumped on Thursday after CEO Rene Haas said he believes the semiconductor designer is on track to generate $2 billion from its new artificial intelligence (AI) chip.
Image source: The Motley Fool.
Missed AI’s "Act 1"? Act 2 Could Be 15x Bigger. Most investors think they missed the AI boat because they didn't buy Nvidia in 2005. But according to our analysts, we’re only at the end of "Act 1"—the R&D phase. "Act 2" is the global rollout. Continue »
Securing supply
Arm's new AI chip has received a strong customer response. So much so that the chipmaker has struggled to produce enough of them. It's a good problem to have, but it's weighed on Arm's stock price nonetheless.
Yet that might be about to change.
During an interview with CNBC's Jim Cramer on Wednesday, Haas said supply constraints were easing for its Arm's new AGI CPU data center chip.
Back in May, Haas pegged customer demand for the chip at $2 billion. Yet ARM guided for only $1 billion in revenue due to supply shortages.
Now, however, Haas is more confident that Arm can satisfy that $2 billion in demand.
"We're feeling good about it," Haas said. "We're feeling really good about it."
Entering the AI CPU arena
Arm has a lot riding on its new chip. The semiconductor leader has long licensed its architectures to other chipmakers. The AGI CPU marks Arm's first attempt at marketing its own fully developed chip.
The AI central processor market is a massive opportunity. One that's set to grow roughly fivefold to $170 billion by 2030, according to Bank of America.
So, any positive news regarding the success of Arm's AGI CPU is likely to be met by cheers from investors.
Bank of America is an advertising partner of Motley Fool Money. Joe Tenebruso has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Arm Holdings. The Motley Fool has a disclosure policy.