Arm Holdings Named Top Pick by Morgan Stanley for Strong Position in Edge AI Market
In a recent report, Morgan Stanley has identified Arm Holdings as its new top pick, highlighting the company's strong foothold in the rapidly expanding Edge AI market. The analysts at Morgan Stanley point to the recent launch of the iPhone 16, which features Arm's v9 architecture in the A18 processor, as a key driver of growth for Arm.
According to the investment bank, Arm is poised to benefit from the increasing adoption of v9 cores and the shift towards custom silicon work in the mobile sector. This trend is expected to drive significant growth in mobile, infrastructure, and automotive industries.
Morgan Stanley projects a 35% compound annual growth rate in mobile from FY24 to FY27, with Arm's expansion in royalties and licensing deals playing a crucial role in boosting its earnings. The analysts also anticipate a strong performance in Q4 as a major client renews its agreement with Arm.
The release of the iPhone 16, powered by Arm's A18 processor, is seen as a major opportunity for the company, with Apple's AI feature rollout expected to drive iPhone shipments to new heights. This aligns with Arm's growth expectations as it capitalizes on the momentum of the new iPhone product cycle.
While Morgan Stanley slightly adjusted its FY27 EPS estimate to $3.63, the analysts maintain a price target of $175 for Arm, citing the company's CPU dominance and pivotal role in the development of Edge AI. Overall, Arm Holdings is well-positioned to capitalize on the growing Edge AI market, making it a top pick for investors seeking exposure to this fast-growing sector.