New York: Arm Holdings shares extended gains in premarket trading after the chip designer’s buoyant market debut, with some attributing the strength to retail investors rushing to buy the shares.
The stock climbed about 6 per cent to $67.54 on Friday, and is now trading more than a third above the initial public offering price of $51.
Owner SoftBank Group sold only 10 per cent of Arm’s stock in the IPO, which according to Saxo Bank AS’s Peter Garnry led to low levels of participation by smaller investors. “This likely generated a lot of demand” from that part of the market, said Garnry, the bank’s head of equity strategy.
Arm, whose chips are found in most of the world’s smartphones, garnered the most buy orders on Fidelity’s trading platform Thursday - easily outpacing demand for Tesla and Nvidia.
The surge in retail demand underscores how small traders are clamoring to get a piece of potential winners amid the frenzy around artificial intelligence, with Arm standing to benefit from the stampede toward AI chips.
The success of the IPO also bodes well for online grocery-delivery firm Instacart and marketing and data automation provider Klaviyo, which are set to price their listings next week.
Needham & Co. became one of the first brokers to initiate coverage of Arm, giving the stock a hold rating.
The valuation “looks full,” analyst Charles Shi wrote in a note on Thursday. “We think Arm can grow by capturing greater value from smartphones, but not enough to support upside from the stock’s IPO valuation.”
