Barclays Raises Arm Holdings plc (ARM) Price Target to $155, Citing Strong AI and Semiconductor Market Position

Affan Mir

Wed, Jan 22, 2025, 5:02 AM 4 min read

Insights on AI's Potential and Its Evolving Capabilities

AI is rapidly advancing, with significant strides being made toward achieving more powerful and capable systems. While challenges and limitations have arisen along the way, the field is still evolving and finding innovative solutions to overcome obstacles. As AI systems grow increasingly capable, they are expected to perform tasks with human-level proficiency which can create new opportunities for efficiency and problem-solving.

In an interview with CNBC, Dario Amodei, co-founder and CEO of Anthropic, discussed the ongoing developments in AI and emphasized that while past challenges have seemed like barriers, they were often overcome through innovations. He expressed confidence that AI is on track to achieve powerful capabilities in the next few years.

Amodei highlighted Anthropic's progress in creating AI that can autonomously operate computers, which is a step toward the broader goal of building a "virtual collaborator" by 2025, which would assist with different tasks. Regarding competition, he noted that while processing power is crucial, it’s not the only factor, as each AI model has its unique strengths. He mentioned Claude's popularity, especially for its personable interactions, while mentioning a study where Claude outperformed other models in gaining radiologists' trust.

AI in Software Development and the Path to AGI

Amodei's vision for Anthropic also aligns with the rapid advancements in AI that are transforming software development. According to the report: The second wave of AI coding is here, by MIT Technology Review, generative AI is quickly advancing in software development, especially in coding. Tools like GitHub Copilot and AI chatbots such as Claude and ChatGPT are already helping millions of developers with tasks like debugging and code generation. Moreover, startups like Zencoder and Poolside are taking this further as they are creating systems that can prototype, test, and fix code. These tools aim to go beyond autocomplete by understanding both the syntax and functionality of code to mimic the human coding process.

While some believe AI could bring us closer to artificial general intelligence, others argue that large language models are not suited for tasks requiring precise logic. Companies like Merly are focusing on intermediate representations of code to address this. The report states that, as AI tools evolve, developers will increasingly rely on them for faster prototyping, bug fixing, and code generation and shift their roles from coders to managers of AI-driven processes. This could reduce the need for large teams of programmers in the future.

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A robotic arm holding a semiconductor chip, emphasizing the precision and quality of the company's production equipment.

Arm Holdings plc (NASDAQ:ARM)

Number of Hedge Fund Holders: 38

Arm Holdings plc (NASDAQ:ARM) designs, develops, and licenses CPU products, system IPs, and related technologies for diverse markets, including automotive, IoT, and consumer devices.

On January 17, Barclays analyst Tom O'Malley increased the price target for Arm (NASDAQ:ARM) to $155 from $145 while maintaining an Overweight rating, and highlighted the company's strong position in the semiconductor sector. The firm’s 2025 outlook focuses on artificial intelligence, emphasizing a divide between leaders and laggards. Barclays favors stocks with proprietary serializer/deserializer technology but is cautious about certain sectors like semiconductors, PC, and handsets, expecting recovery in these areas to take more time.

Overall ARM ranks 5th on our list of the AI stocks you should not miss. While we acknowledge the potential of ARM as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than ARM but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.