[Post-1Q27 Earnings/Latest Edition] Understanding ARM: The Company That Owns the 'Blueprints for All AI Chips,' 90% Owned by SoftBank
The fact that ARM is inside every AI chip
The iPhone's A18 Pro chip, the MacBook's M4 chip
The 'Vera CPU' featured in NVIDIA's Vera Rubin GPU
AWS's Graviton5, Google's Axion, Microsoft's Azure Cobalt 200
All of these cutting-edge chips adopt ARM's architecture.
Furthermore, there is a surprising fact.
ARM (ARM Holdings PLC) does not own factories, does not purchase silicon wafers, and does not package or sell finished semiconductors.
What ARM sells are only intangible 'chip design languages (architectures)' and 'design blueprints (IP)'.
This extremely unique business model—where the physical entity is invisible, yet it exists at the center of every computational process in the world—makes ARM the most important, yet simultaneously the most misunderstood, company in the global semiconductor industry.
On July 29, 2026, ARM announced its Q1 FY2027 (April-June 2026) earnings. Revenue was $1.29B (+22% year-over-year), marking the highest performance for a first quarter in its history. EPS (earnings per share) also significantly exceeded market expectations. Despite this, the stock price plummeted by -8% the day after the earnings announcement.
'Why does the stock price fall on earnings that look so perfect?'
In this article, we will thoroughly dissect everything from ARM's essential business structure to the depths of its latest earnings, and its technological superiority in solving the limits of data center cooling, to provide you with future investment decisions.
☑️ What you will learn in this article
What is ARM: The astonishing business model and mechanism of 'the company that doesn't make chips but is in every chip'
Why SoftBank owns 90%: The special significance for Japanese investors and the structure of its market capitalization
Q1 FY2027 Earnings Analysis: The 'market misunderstanding' of why the stock price fell -8% despite recording record highs in all metrics
Data Center Revolution: The fact that royalties have surged to 'more than double year-over-year' and the shift in hegemony in the AI era
The Impact of AGI CPUs: The next massive stock price catalyst, with demand already exceeding $2B
Investment Decision on ARM Stock: Should you buy it now with the new NISA, even at a high valuation?
Chapter 1: ARM is a business that sells 'design languages'
1-1. Imagine a 'Map for How to Build' Chips
The development and manufacturing process of semiconductor chips is very easy to understand if you compare it to a massive building or housing construction project.
Architect (ARM's role): Creates the fundamental 'structural blueprints and rules,' such as the building's basic structure, strength calculations, and how to route electrical wiring.
Carpenter/Designer (NVIDIA, Apple, AWS's role): Receives the architect's rules (architecture), customizes them for their own purposes (whether for smartphones or AI servers), and completes the 'actual product blueprints.'
General Contractor (Role of foundries like TSMC): Receives the completed detailed blueprints and uses state-of-the-art manufacturing processes to actually etch circuits onto silicon wafers, manufacturing (building) the physical chips.
ARM is the 'genius architect' positioned at the very top of this value chain. To save the enormous time and cost of creating unique chip rules from scratch, companies design their chips according to ARM's rules.
When considering the efficiency of the entire process and the improvement of yields, using ARM's designs, which are fully optimized as industry standards, is the most rational and low-risk choice from an engineering perspective.
1-2. The Two 'Languages' and 'Assets' That ARM Dominates
The essential assets that ARM provides to its customers and from which it generates overwhelming profits are divided into the following two categories.
① Instruction Set Architecture (ISA)
An ISA is the 'language system of instructions' that mediates between software (OS and apps) and hardware (CPU). In human terms, it is the grammatical rules themselves, like English or Japanese.
Software built based on ARM's ISA can basically be designed to run on any ARM chip. The reason the smartphone app ecosystem has become so massive is that 99% of the world's smartphones adopt ARM's ISA and run on a common language called 'ARM language.'
Once a software ecosystem is built in this language, switching to another language (another architecture) incurs astronomical costs, creating a powerful barrier to entry (moat).
② Processor Core Design (IP: Intellectual Property)
Beyond just the language rules, ARM also sells the 'detailed blueprints' of the actual CPU cores it has designed itself.
They are extremely optimized according to their use case, and include the following lineup:
Cortex-A Series: High-performance cores for smartphones and PCs
Cortex-M/R Series: Power-saving, real-time cores for IoT devices, automobiles, and industrial equipment
Neoverse Series: Ultra-high-performance cores for data centers and cloud AI
Customer companies can use these blueprints 'as-is (off-the-shelf)' or 'highly customize them for their own use.' For example, Apple's M-series chips are the ultimate implementation example, built on ARM's basic architecture while pouring in Apple's own incredible technical prowess to apply customizations.
Chapter 2: ARM's Business Model is Structured to 'Earn Through Royalties'
How does ARM, a company without factories, generate billions of dollars in cash annually? Its revenue source is a very simple and powerful 'two-tier structure'.
| 収益タイプ | Q1 FY2027実績 | 前年同期比 | ビジネスの性質・特徴 |
|---------------|---------------|-----------|-----------------------------------------------|
| ① ライセンス | $574M | +23% | 変動が大きい。大口顧客との契約更新タイミングに依存 |
| ② ロイヤルティ | $715M | +22% | 非常に安定的。世界のチップ総出荷数と連動 |
| 合計（Total） | $1.29B | +22% | 第1四半期として過去最高を更新 |1. Licensing Revenue
This is the contract fee for customers to obtain the 'right to use' ARM's architecture and blueprints (IP) in their own product development.
It is paid at the stage of starting chip development, and it has a 'lumpy' nature where quarterly revenue fluctuates significantly depending on the timing of large multi-year contracts (such as Arm Total Access).
Q1 FY2027 Results: Licensing revenue was $574M (+23% YoY).
Notes: Of this, $193M was generated from technology licensing and design service contracts with the parent company, SoftBank. The CFO stated that 'the pace of around $200M is expected to continue for the remaining quarters,' providing a solid foundation.
2. Royalty Revenue
Every time a chip designed and manufactured by a customer is installed in a smartphone or server and 'shipped to the market,' a usage fee is paid to ARM at a fixed percentage (or fixed amount) per chip.
This is the 'golden spring' of ARM's business.
The more chips that are sold, the more money ARM automatically receives without doing anything. Since there are no manufacturing or logistics costs involved, the gross margin for this portion is effectively close to 100%.
Q1 FY2027 Results: Royalty revenue was $715M (+22% YoY). It recorded the highest ever for a first quarter.
The latest architecture, 'Armv9,' is set with a significantly higher royalty rate (unit price) compared to the older generation v8.
Currently, the proportion of Armv9 in total shipped chips is rising rapidly, which is a powerful growth engine that means 'profits grow significantly even if the number of units shipped remains the same'.
Chapter 3: SoftBank and Masayoshi Son: The Japanese Bet on 'Owning ARM'
When discussing ARM, a global infrastructure company, the presence of the Japanese company SoftBank Group cannot be separated.
3-1. Why SoftBank Owned ARM Twice
The relationship between SoftBank and ARM has reached its current state through two dramatic phases.
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Phase 1 (2016)
SoftBank invested a massive amount of approximately $32 billion (about 3.3 trillion yen at the exchange rate at the time) to acquire ARM, which was listed on the London market, and made it a wholly-owned subsidiary (taking it private).
It was a deal based on CEO Masayoshi Son's intense conviction that 'After the mobile revolution, the IoT and AI revolution will come. ARM will be at the center of everything in that world.'.
At the time, it was criticized as a 'high-price buy,' but it freed ARM from the short-sighted pressure of the market and provided an environment to continue massive investment in the research and development of the next-generation architecture (v9).
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Phase 2 (2023)
At the perfect timing when the AI boom was ignited, ARM was re-listed (IPO) on the US NASDAQ.
The IPO price was $51, and the market capitalization at the initial price was approximately $54.5 billion.
3-2. ARM Stock as a 'Proxy Indicator' for SoftBank Stock
As of August 2026, SoftBank Group continues to firmly hold approximately 90% of ARM shares. The floating shares circulating in the market are only about 10%.
This unique shareholder structure has the following significant implications:
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Reversal and Correlation of Market Capitalization
It has become the norm for ARM's market capitalization (over approximately $220 billion) to significantly exceed that of its parent company, SoftBank.
In other words, the majority of SoftBank's corporate value is supported by 'unrealized gains on ARM shares,' and fluctuations in ARM's stock price directly impact SoftBank's stock price.
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Supply and Demand Squeeze
Because the floating shares are extremely limited, when institutional investors move to buy ARM as part of their AI portfolios, even small amounts of buying can easily cause the stock price to jump upward (high volatility).
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Implications for Japanese Investors
Even for those who primarily invest in Japanese stocks, if you hold SoftBank stock (9984), it is effectively synonymous with 'taking a massive position in global AI infrastructure through ARM.'
The Q1 FY2027 earnings materials also reveal that SoftBank is not just a shareholder, but also a customer paying $193 million in licensing fees, indicating deep collaboration in technical development.
Chapter 4: 'ARM is Inside Every AI Chip' - The 2026 Data Center Revolution
The market where ARM has built overwhelming dominance over the past decade or more is the 'smartphone market.' Its share in mobile processors exceeds 99%, making it a de facto total monopoly.
However, now that the smartphone market has reached maturity, the true engine justifying ARM's valuation and pushing it to even greater heights is the 'data center.'
4-1. The 'Inevitable Choice' to Break Through Cooling Limits
The data center market was long the exclusive domain of the 'x86 architecture' provided by Intel and AMD. However, the rise of AI (generative AI and large language models) has fundamentally overturned the nature of data centers.
As AI accelerators, starting with NVIDIA's GPUs, are packed into racks, the biggest challenge for data centers has shifted from 'computing power' to 'power supply and cooling (thermal management)'.
In AI systems that involve massive heat generation, continuing to use conventional CPUs with poor power efficiency causes the entire facility to hit its thermal limit.
This is where 'ARM's power-saving design,' which has been refined for 30 years in the 'environment with extreme constraints on battery capacity and heat generation' that is the smartphone, has begun to hold a decisive advantage in data centers.
Hyperscalers have begun shifting en masse to the ARM architecture (Neoverse) to minimize power consumption in the CPU portion and redirect the saved power to AI GPUs.
4-2. Major ARM-based AI Chips and Data Center CPUs
Currently, cloud giants are all deploying their own ARM-based proprietary chips.
| 企業名 | 製品名 | 採用しているARM設計 | 用途・特徴 |
|-----------|-----------|-------------------|-------------------------------------------|
| NVIDIA | Vera CPU | ARM Neoverse | 次世代Vera Rubin GPUと密結合する超高性能CPU |
| Google | Axion | ARM Neoverse V2 | GCPの汎用およびAIワークロード向けクラウドCPU |
| Amazon | Graviton5 | ARM Neoverse V3 | EC2インスタンス向け。業界で最も成熟した自社チップ |
| Microsoft | Cobalt 200| ARM Neoverse N2 | Azure仮想マシン向けの高効率プロセッサ |
（注：企業名は順不同。各社とも次世代機の開発を加速させています）Every time these chips are shipped and put into operation, royalties flow into ARM.
4-3. The Explosive Proliferation of Neoverse: From 150 Million to 1.5 Billion
In the Q1 FY2027 earnings, one of the most astonishing figures was the performance in the data center segment.
CEO Rene Haas declared, "Royalty revenue for data centers more than doubled year-over-year. All incremental computing is based on the ARM architecture.".
Furthermore, the cumulative shipments of the data center core 'Neoverse' have surpassed 1.5 billion cores. It took about six years to reach the first billion cores, but the additional 500 million cores were achieved in just nine months.
This is the best evidence that the ARM shift in data centers is not linear, but is accelerating exponentially.
Chapter 5: Q1 FY2027 Earnings, Why Did the Stock Drop -8% Despite Record Results?
Despite having such a powerful business foundation, the day after the Q1 FY2027 earnings were announced on July 29, 2026, ARM's stock price fell by approximately -8%, selling off to around $225.
Correctly decoding this market reaction is extremely important for investment decisions.
5-1. Earnings Figures (All at Record High Levels)
First, let's look at the objective numbers.
| 財務指標 | Q1 FY2027実績 | 前年同期比 | アナリスト予想との比較 |
|-------------------|---------------|-----------|-----------------------|
| 売上高 (Revenue) | $1.29B | +22% | ビート（$1.26-27B 予想） |
| Q2 FY27 売上見通し | $1.38B | +22% | ビート（$1.34B 予想） |
| Non-GAAP EPS | $0.45 | +29% | ビート（$0.40 予想） |
| Q2 FY27 EPS 見通し | $0.47 | N/A | ビート（$0.43 予想） |Revenue, segment income, and profit all hit record highs for a first quarter, clearing Wall Street analyst expectations. In terms of essential business progress, the content is close to 'perfect'.
5-2. The 'Three Reasons' Why the Stock Price Still Plummeted
The background to the stock price adjustment despite the stunning earnings involves a mix of short-term market expectations and macroeconomic factors.
Reason 1: 'Minor Revision' to Full-Year Royalty Growth Outlook
ARM slightly lowered its full-year FY2027 royalty growth rate forecast from the 'around +20% range' presented in the previous quarter to 'high teens (+17-19%)' this time.
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The main factor for this is the 'delayed recovery and softening of the smartphone market'.
Even though the data center business is growing explosively, the proportion of smartphones in total revenue is still large, so the stagnation in the smartphone market slightly dragged down the overall growth rate.
The market's strict perspective, which allows for no slowdown in order to justify a high valuation (P/E ratio), was reflected.
Reason 2: Quarterly Volatility in License Revenue
License revenue in the previous quarter (FY2026 Q4) was at a historic scale of $819M. Compared to that, this Q1 is $574M. While it is a respectable +23% growth year-over-year, it is a decrease of about 30% compared to the immediately preceding quarter.
Due to the nature of license revenue, it is natural for gaps in contracts to occur, but algorithmic trading and short-term players reacted mechanically as a 'deceleration in momentum'.
Reason 3: Adjustment Phase for the Entire AI Hardware Sector
The fourth week of July 2026, when the earnings were announced, was a period where the entire AI semiconductor sector, including NVIDIA and AMD, had entered a major adjustment phase (sector rotation) due to profit-taking and macroeconomic uncertainty.
It can be said that this was much more of a 'sympathetic decline' rather than a deterioration in ARM's specific fundamentals.
5-3. Short-term market reaction that missed the 'essence'
For long-term investors, this 8% drop is likely nothing more than an 'overreaction due to noise'.
Looking at the depths of the earnings, the more important long-term indicator, Annual Contract Value (ACV), grew 13% year-over-year to reach a record high.
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Furthermore, the share of royalty revenue from the high-priced latest architecture 'Armv9' has expanded from nearly 0% just a few years ago to approximately 33%.
The more Armv9 penetrates, the more the revenue per chip (ARPU) will structurally continue to rise, even if smartphone shipment volumes remain flat.
This is ARM's true profit growth driver, and it holds potential that more than compensates for the temporary softening of the smartphone market.
In fact, in less than a week, the stock price returned to its pre-earnings level.
However, it is important to continue focusing on long-term growth drivers rather than paying too much attention to temporary stock price movements.
Chapter 6: The Next Big Catalyst - $2B Demand for ARM AGI CPUs
The greatest hope supporting the premium valuation of ARM stock, and the next game changer, is the existence of the 'AGI CPU'.
6-1. What is an AGI CPU?
It is a next-generation CPU design optimized to the extreme for AGI (Artificial General Intelligence).
Until now, ARM provided 'basic blueprints' and had customers build them out, but the 'AGI CPU platform (including Compute Subsystems: CSS, etc.)' is a solution provided in a form closer to a finished product.
According to ARM's official announcement, this AGI CPU delivers 'more than twice the AI performance at the same power consumption (wattage)' compared to conventional x86 (Intel/AMD) based CPUs.
When considering data center scale, this efficiency creates tremendous economic impact. According to ARM's estimates, it can reduce CapEx (capital expenditure) per rack in large-scale data centers by up to $10B.
Furthermore, it is a high-value-added product that will expand ARM's own gross margin from an initial 38-40% to over 50% within two to three years.
6-2. Phenomenal demand: $2B (approx. 300 billion yen) order pipeline
Demand from hyperscalers for this AGI CPU is expanding at a speed that exceeds even ARM's own expectations.
In the Q1 earnings report, it was revealed that the AGI CPU demand pipeline (inquiries from prospective customers) has surpassed $2B (approx. 2 billion dollars). This means that the goal initially set by management of an '$1B opportunity scale in FY2027-FY2028' has already been cleared by more than double.
A roadmap is in place where existing Neoverse customers such as NVIDIA, Google, AWS, and Microsoft will transition to and expand as customers of the AGI CPU platform. From 2027 onwards, when these begin to ship in earnest, royalty revenue from data centers could jump to several times the current level.
However, there are concerns. Although demand is nearly infinite, there are supply chain constraints in every step of semiconductor manufacturing, including securing silicon wafers, substrate packaging (such as TSMC's CoWoS), testing processes, and even the supply of HBM (High Bandwidth Memory).
The speed at which the 'bottleneck of being unable to physically build it even if you want to' is resolved will determine the timing of monetization through AGI CPUs.
Chapter 7: ARM's Overall Business Landscape - The Monopolistic Status of a 'Chip Tax'
The market ARM targets (TAM: Total Addressable Market) is expanding rapidly due to a paradigm shift.
7-1. Rapid Expansion of TAM (Total Addressable Market)
According to the latest presentation materials, the TAM for the semiconductor market targeted by ARM is projected to expand rapidly by approximately three times, from about $535 billion in 2026 to over $1.5 trillion (approx. 220 trillion yen) by 2031.
| ターゲット市場 | 2026年規模 | 2031年予測 | 成長倍率 |
|-----------------------|---------------|---------------|-----------|
| 半導体市場全体（TAM） | $5,350億 | $1兆5,000億+ | 約3倍 |
| Cloud AI（クラウドAI） | $3,300億 | $1兆2,500億 | 約3.8倍 |
| データセンターCPU | $500億 | $1,000億+ | 約2倍 |
| XPU（AIアクセラレータ） | $2,450億 | $1兆+ | 約4倍 |The growth in the 'Cloud AI' sector is particularly staggering, and this represents direct growth potential for ARM.
Furthermore, if they can expand into 'XPUs (custom ASIC chips),' significant growth potential can be identified.
7-2. Phenomenal Expansion of 'Chip Market Share'
Not only is the overall market growing, but ARM's own 'market share' is also expanding rapidly.
ARM's market share by value reached 53% in 2026, up from 42% in 2022. More than half of the value of the world's semiconductors is already built upon ARM designs.
Cloud Computing: 9% (2022) → 23% (2026)
Network Equipment: 26% (2022) → 37% (2026)
Automotive/Robotics: 31% (2022) → 44% (2026)
A shift toward ARM, which is lightweight and power-efficient, is occurring simultaneously not only in data centers, which have been dominated by x86, but also in the field of 'Physical AI' (autonomous vehicles and robots), which will be the main battlefield for AI in the future.
This is no longer just a product share of a single company, but rather a monopolistic status akin to an 'infrastructure tax (chip tax)' imposed on the entire digital society.
Chapter 8: ARM Analysis via the 5+1 Framework
We will objectively evaluate ARM using the '5+1 Framework,' familiar to Manatoku Investment Lab.
① Business Model Analysis: [Rating: ◎]
As mentioned above, it is a two-layer structure consisting of design (IP) licensing and royalties per shipment
Because they do not own manufacturing facilities (Fabs), massive capital expenditure (CapEx) is unnecessary, and inventory risk and logistics costs are also zero
The gross margin is an astonishing ~96% (nearly 100% if looking at royalties alone)
With a workforce of about 6,000, it is one of the world's most sophisticated asset-light businesses, generating massive profits that have earned it a place on the QQQ (NASDAQ 100)
② Competitive Advantage (Moat): [Rating: ◎]
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Moat 1: 30 years of software ecosystem (the strongest moat)
ARM's greatest strength lies not in hardware, but in software. There is a 30-year accumulation of developers worldwide writing code for ARM, and switching to a different architecture (such as RISC-V) would incur massive costs for recompilation and emulation
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Moat 2: An ecosystem of 'shared destiny' with NVIDIA
With ARM CPUs now standardly integrated into NVIDIA's next-generation infrastructure (NVLink Fusion), an invincible chain has been completed where 'the more the AI king NVIDIA spreads, the deeper ARM's moat becomes'
③ Financial Quality: [Rating: ○] (High quality, but hard to see relative to scale)
Q1 FY2027 Revenue: $1.29B (+22% YoY)
Non-GAAP Operating Margin: 41% (+2 percentage points YoY)
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Free Cash Flow (FCF): $665M (Q1 alone). Approximately $2.5B+ on an annualized basis
While the profit margins and FCF generation capabilities are extremely excellent, the FCF yield remains at only about 1.2% against a massive market capitalization of approximately $220 billion
The reality is that it looks expensive if you only look at current cash generation power
④ Growth Drivers: [Rating: ◎]
Rapid growth in data centers: If the current pace continues, data center business revenue will overtake mobile (smartphone) business revenue in FY2028
Adoption of Armv9: Simply increasing the ratio of high-margin v9 from 33% to over 50% will further boost profit margins.
Introduction of AGI CPUs: A $2B demand pipeline will convert to revenue from 2027 onwards, transforming the company into a high-value-added solutions business with gross margins of 50%+.
⑤ Valuation: [Rating: △] (Extremely expensive, but justifiable depending on the scenario)
This is the biggest point of contention for ARM stock. The Forward P/E (Price-to-Earnings ratio) at a stock price around $225 is well over 100x.
Even looking at the PEG ratio (P/E divided by growth rate) which accounts for growth, it is at 4-5x, carrying one of the highest premiums among tech stocks.
The market is buying based on the performance of 'ARM in 2030,' not 'ARM today.' If there is even the slightest flaw in this growth story (such as a prolonged slump in the smartphone market), it carries a significant downside risk due to valuation correction (multiple contraction).
+1 Risk Factors
Prolonged slump in the smartphone market: As it still accounts for the majority of revenue, this is the biggest factor dragging down short- to medium-term performance.
Physical constraints in the supply chain: If TSMC's packaging capacity or memory supply stalls, royalties will not be generated regardless of the demand for AGI CPUs.
Rise of RISC-V: RISC-V, an open-source (free) instruction set architecture, is being rapidly developed as an alternative to ARM, especially in markets like China that are under sanctions. It is not a threat in the span of a few years, but it is a long-term risk over a 10-year span.
SoftBank's movements: If SoftBank sells ARM shares in the market (block trades, etc.) to meet funding needs, there is always a risk that the stock price will fall due to short-term supply and demand deterioration.
Chapter 9: Should you buy ARM now?
9-1. My honest assessment
Quality of business, depth of the moat, and positioning in the AI era. In every respect, ARM is undoubtedly one of the most important infrastructure companies in the world..
From smartphones to the cloud, and eventually to autonomous driving and robots, the evolution of human computing power will be executed on ARM's blueprints.
However, one must evaluate it as an investment target calmly. A P/E ratio of over 100x means that a significant portion of future great success is already priced into the current stock price..
Conditions for the bullish scenario: The data center business continues to grow at an annual rate of +30-40% over the next five years, and AGI CPUs grow into a $10B business. If you believe in this scenario, the current high valuation could be a long-term buying opportunity.
Conditions for the bearish scenario: The smartphone market slump continues for several years, and yields for in-house developed chips (custom silicon) in data centers and supply chain issues persist. In this case, there is a risk that the stock price will undergo a long-term correction to the mid-$100 range due to valuation collapse.
Personally, I prefer stocks that are relatively undervalued. And currently, hyperscaler stocks like 'Alphabet, Amazon, Microsoft,' GPU/XPU stocks like 'NVIDIA, Broadcom, Marvell,' and chip fabs like 'TSMC' can be purchased at relatively low valuations (20-30x).
Therefore, I cannot strongly recommend it, especially to those who already hold other AI stocks. However, if you missed the AI boom and want to get a big return this time, it might be interesting to buy ARM.
9-2. A special message for Japanese investors and the new NISA strategy
Also, investors holding SoftBank stock (9984) already indirectly hold approximately 90% of ARM stock and have incorporated its benefits into their portfolios.
Whether to aim for an increase in SoftBank's NAV (Net Asset Value) or to directly hold ARM (NASDAQ: ARM) purely as a semiconductor IP business—this is a luxury choice available only to Japanese investors who have a 'unique investment context through a Japanese company.'
[Policy for utilization in the new NISA]
ARM stock can be purchased within the 'Growth Investment Quota' of the new NISA. However, the unit price is not cheap at $200–$250, and it is not uncommon for daily volatility to reach 5–10%.
Therefore, I strongly recommend that you do not set it as the core of your portfolio, but rather use it as a 'satellite investment (growth accelerator)' that stays within 5–10% of your total portfolio, after having solidified your core with robust investment trusts like VANGUARD S&P500 (VOO) or All Country.
Summary: Key points of the complete ARM guide
In this article, I have explained 'ARM' in detail. There are many points of interest regarding its business model and recent earnings.
Unique business model: A one-of-a-kind company that manufactures no chips at all, but dominates 53% of the global semiconductor market (by value) through licenses and royalties for 'design languages (ISA)' and 'blueprints (IP)'
The truth about Q1 FY2027 earnings: Recorded $1.29B in revenue (+22%), the highest ever for a Q1. The 8% drop in stock price is a 'short-term overreaction' due to a slight revision in full-year guidance caused by the smartphone slump and sector adjustments
Also, keep an eye on ARM's future growth drivers.
Data centers are the new protagonists: Royalties for data centers have more than doubled year-on-year. Power and heat dissipation limits caused by AI are forcing a shift to ARM's power-saving architecture
Explosive adoption of Neoverse: 1.5 billion cores shipped in total. The most recent 500 million cores were achieved in just 9 months, with adoption speed accelerating exponentially
Strong ecosystem with NVIDIA: The next-generation Vera CPU is also an ARM design. The growth of AI champion NVIDIA is directly linked to the growth of ARM
Next-generation catalyst 'AGI CPU': The demand pipeline has already exceeded $2B (double the initial target). A future flagship product that will bring significant CapEx reductions
The only thing to be careful about is 'valuation'.
A P/E ratio of over 100x is expensive, but it is a prepayment for 'overwhelming growth in 2030.' If you are interested, do not be swayed by short-term noise; long-term holding in the new NISA satellite quota (5–10%) is the best solution.
Thank you for reading to the end.
I hope you learned something from this article.
I have also written articles explaining 'AI server racks' and 'cutting-edge HBM memory.' Please take a look at those as well.
