Shares of Arm Holdings plc (Nasdaq: ARM) are surging this morning after the semiconductor design firm announced it will begin making its own chips for AI workloads. The move from chip designer to chipmaker represents the most significant shift in the company’s business model in its 35-year history. Here’s what you need to know.
Arm revamps its business model
For over three decades, the British semiconductor firm had one primary business model: it designed chips and then licensed those designs to other companies, including Apple and Qualcomm, which would then make their own semiconductors based on Arm’s designs.
Under this business model, Arm essentially made the blueprints that other companies followed to make their own chips. And every time a company made a chip with Arm’s blueprint, Arm earned a licensing fee. That license fee amounted to about 5% per chip made with Arm’s blueprint, according to Bloomberg, meaning that if a chip cost $100, ARM made about $5 from it.
But now Arm has announced that it will no longer be just a chip blueprint company. It will also begin making and selling its own chips directly to customers, and those chips will be designed to run AI workloads.
The Arm AGI CPU is built for the agentic AI era
At an event yesterday in San Francisco, Arm CEO Rene Haas announced the pivot in the company’s business model, revealing the Arm AGI CPU. The chip is specifically designed for AI data center customers who need as much processing power as possible to run agentic AI systems.
This means that despite Arm’s designs being the blueprint for many of the CPUs found in laptops and smartphones, including Apple’s iPhone, the company’s first self-made chip will not be destined for those gadgets. Instead, the company is focusing on making the chips that so-called hyperscalers need to power their data centers.
“Today marks the next phase of the Arm compute platform and a defining moment for our company,” Haas said, announcing the pivot. “With the expansion into delivering production silicon with our Arm AGI CPU, we are giving partners more choices all built on Arm’s foundation of high-performance, power-efficient computing, to support agentic AI infrastructure at global scale.”
