Why did Arm Holdings stock plunge today?

existASML holding company(NASDAQ resonance stock code:ASML)After disappointing financial results led to a massive sell-off in artificial intelligence (AI) stocks, theArm holding company(NASDAQ resonance stock code:ARMArm was the worst performer, dropping 12% during the day, worse than ASML's 7.1% drop.

Arm stock is getting spooked.

Artificial intelligence stocks have been on a tear in recent months, and Arm has been one of the winners. The chip designer, known for its high-performance CPU architecture, has seen accelerated revenue growth from the breakthrough technology.

However, ASML's latest news this morning has thrown cold water on the sector, leading to a widespread sell-off in AI stocks. As one of the most expensive stocks in the sector, Arm was hit hard by the news.

ASML reported a sharp decline in revenue and its guidance expects sales to continue to decline in the second quarter. While this news is roughly in line with Wall Street expectations, both the first quarter revenue numbers and guidance fell short of analysts' expectations.

ASML expects revenue growth to improve in the second half of this year � accelerating through 2025 � but the latest news suggests that theTSMCDemand from chipmakers like Armstrong may not be as strong as expected. That, in turn, could be a warning sign for Arm, whose shares soared after the company promised in February to accelerate revenue growth on artificial intelligence-related demand.

Next Steps for Arm

Arm's stock has high expectations, with a forward price-to-earnings (P/E) ratio of more than 100 and no authors like its nameNvidia The company has seen the same kind of eye-popping revenue growth as Nvidia. Still, the company has a bright future in AI as its CPU architecture is favored by the likes of Nvidia, in part because it requires less power than other architectures.

We'll get an update on Arm's progress next month when it releases its fourth-quarter results. Until then, expect the stock to remain volatile as investors weigh its valuation against the future growth of artificial intelligence.

Should you invest $1,000 in Arm Holdings now?

Consider this before buying shares of Arm Holdings:

Motley Fool Stock AdvisorA team of analysts have just selected what they believe to be the most popular analysts in the world at the moment.-est (superlative suffix)The name of the person is suitable for the investor to purchase10Only ...... and not Arm Holdings. The 10 stocks that made the list could generate huge returns in the coming years.

Consider April 15, 2005NvidiaWhat it was like when it was on the list ...... If you invested $1,000 at the time of our recommendation.You will have 535,597dollar! *Stock Advisor provides easy-to-use stock investment tools for investors.

Stock AdvisorIt provides investors with an easy-to-understand blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. Stock Advisor The service has contributed to the S&P 500 Index's return since 2002.translate twiceMuch*.

View these 10 stocks."

*Stock Advisor's Report as of April 15, 2024

Jeremy Bowman does not own any of these stocks. the Motley Fool holds recommended stocks of ASML, Nvidia and Taiwan Semiconductor Manufacturing. the Motley Fool has a disclosure policy.

Why did Arm Holdings shares plunge today?