The artificial intelligence (AI) stock craze, although it’s moderated some in recent times, is a long-tail trend that began around two years ago. Many investors are understandably convinced that the technology is going to be ubiquitous before long, and they’re still scrambling to find investments that might take good advantage of this trend.
One of the more durable AI stock plays, U.K.-based ARM Holdings (ARM 0.69%), saw another professional researcher recently join the crowd of bulls tracking it. He thinks the company is worthy of a buy, and here’s why.
A new bull says “buy”
On Monday, storied Swiss bank UBS Group initiated coverage of Arm’s stock. Analyst Timothy Arcuri flagged the highly specialized AI stock as a buy, with a price target of $160 per share. That’s 17% higher than the stock’s most recent closing price.
Arm has a somewhat atypical revenue model — it focuses on drawing licensing and royalty fees from processor technology it sells to clients. In his inaugural research note on the company, according to reports, Arcuri wrote that AI is powering growth in all of Arm’s end markets, particularly the data center segment.
This robust growth should even extend into smartphones, even though it’s a business in which Arm already has significant penetration. Arcuri has forecast a compound annual growth rate (CAGR) of 23% from 2023 to 2025 alone.
A top pick
Arm is one of the stocks best-positioned to exploit the vast opportunities offered by AI — and across multiple tech segments, at that. The UBS pundit accurately opined that the company is quite expensive based on its valuations, but stocks with immense potential tend to be that way.
I think this stock is undoubtedly a buy. I’d go further to say it might be the best AI play right now.
Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
