Jefferies Increases Arm Holdings Price Target to 320 Dollars on Artificial Intelligence Driven CPU Demand

Jefferies has raised its price target for Arm Holdings PLC (NASDAQ:ARM) to 320 dollars from 290 dollars, maintaining its buy rating on the Cambridge-based semiconductor designer. The investment bank believes orders for the company’s AGI CPU have increased substantially following the release of full-year results, driven by rising demand for processors in agentic artificial intelligence applications.

The revised target suggests potential upside of approximately 20 per cent from the current share price of 267.19 dollars. Jefferies has raised its revenue forecast for Arm’s AGI CPU to 18 billion dollars for the financial year 2031, surpassing the company’s own guidance of 15 billion dollars.

The broker anticipates Meta will emerge as the largest customer for these chips, followed by OpenAI, Oracle and ByteDance. Oracle and ByteDance are understood to be among the most recent clients to sign agreements with Arm.

During its Arm Everywhere event in March, the company estimated the total addressable market for CPUs by 2030 at more than 100 billion dollars. Jefferies now suggests that estimates have since expanded to 200 billion dollars. With Arm expected to capture at least a 15 per cent market share, the investment bank believes revenues will substantially exceed current guidance.

Jefferies has also adjusted its nearer-term projections, forecasting AGI CPU revenue of 1.5 billion dollars in financial year 2028 and 3 billion dollars in 2029, up from previous estimates of 1.4 billion dollars and 2.7 billion dollars respectively.

Arm has indicated that demand remains constrained by foundry capacity and DRAM availability. However, during a Jefferies roadshow, the company’s finance chief clarified that additional wafer capacity is available at higher prices, which would compress gross margins. Jefferies expects Arm to utilise these options to secure market share.

In the data centre segment, royalty rates are increasing, with CSS-based royalties rising to 1.50 dollars per core from 1 dollar previously. Jefferies also anticipates that SoftBank, which holds a majority stake in Arm, will launch a graphics processing unit next year utilising Arm’s design services. The broker estimates royalties could exceed 7,000 dollars per chip, reflecting the elevated selling prices of GPUs.

The bank forecasts annual earnings growth of 45 per cent over the next five years, arguing that this visibility warrants a premium valuation. The new price target is based on 29 times 2031 earnings, representing a 52 per cent premium to merchant CPU peers Intel and AMD. Jefferies justifies this premium by citing Arm’s significantly higher margins and growth trajectory.