Arm's Pivot to Selling Its Own Chips Wins Investor Backing

Arm Holdings is winning over institutional investors with its pivot toward selling its own chips, with fund managers arguing the move positions the British semiconductor designer to capitalise on surging AI demand.

For most of its existence, Arm has operated as a licensing business — designing chip architectures and collecting royalties from manufacturers who build on them. That model made Arm one of the most influential companies in the semiconductor industry without ever fabricating or selling a chip directly. The decision to change that formula marks a significant strategic inflection point, and investors appear to be paying close attention.

Why Arm's Chip Ambitions Are Resonating With the Market

Clare Pleydell-Bouverie, Fund Manager at Liontrust Asset Management, told Bloomberg's Tom Mackenzie on Bloomberg Tech: Europe that she views the move positively. Liontrust's top technology holdings include Nvidia, Broadcom, and TSMC — three companies that between them cover GPU manufacturing, custom silicon, and advanced chip fabrication respectively. Pleydell-Bouverie's endorsement of Arm's direction carries weight precisely because her existing portfolio reflects a sophisticated read of where AI semiconductor value is being created.

Arm's move to sell its own chips has been largely cheered by investors.

The logic behind investor enthusiasm is straightforward. Licensing fees, while lucrative, capture only a fraction of the value generated when a chip design is commercialised at scale. By entering the merchant chip market, Arm could capture a larger slice of the economics — particularly as AI workloads drive demand for specialised, efficient silicon across data centres, edge devices, and consumer hardware.

The AI Hardware Race and Arm's Strategic Position

Arm's architecture already underpins the vast majority of smartphones globally and has made significant inroads into data centre computing. Apple, Amazon, Google, and Microsoft have all built custom chips on Arm's instruction set. That ubiquity gives Arm an unusual advantage: it understands, at an architectural level, how the industry's most powerful technology companies are designing for AI performance and energy efficiency.

Moving into chip sales would not necessarily mean competing head-to-head with its licensees — at least not initially. The more likely path involves Arm targeting specific market segments where it can offer integrated solutions that its licensing model cannot address. AI inference at the edge, for instance, represents a growing opportunity where Arm's efficiency credentials are particularly compelling.

The broader semiconductor landscape provides useful context. Nvidia's market capitalisation surged past $2 trillion at its peak on the back of AI GPU demand. Broadcom has built a substantial custom AI chip business, reporting $12.2 billion in AI revenue for fiscal year 2024, according to the company. TSMC, which manufactures chips for most of the industry's leading designers, posted record revenues driven overwhelmingly by AI-related demand. Arm, in this context, has watched significant value creation occur downstream of its own technology.

What Liontrust's Endorsement Signals

The fact that a fund manager with concentrated positions in Nvidia, Broadcom, and TSMC is supportive — rather than cautious — of Arm's expansion is telling. These are not companies that Arm would obviously displace. Instead, Pleydell-Bouverie's framing suggests she sees Arm's move as complementary to the broader AI hardware build-out rather than disruptive to it.

Liontrust's technology holdings reflect a thesis that AI infrastructure spending will remain elevated and that the companies with the deepest technical moats in chip design and manufacturing will be its primary beneficiaries. Adding Arm to that picture — as a company transitioning from pure IP licensor to chip vendor — suggests she views the move as strengthening rather than complicating that investment case.

Arm's SoftBank-controlled ownership structure means strategic decisions of this magnitude ultimately flow through Tokyo. SoftBank CEO Masayoshi Son has been vocal about his ambitions for Arm to become central to the AI era, including publicly discussed plans around an AI chip venture. Whether Arm executes its chip ambitions independently or through partnerships will shape how quickly investors can assess the financial impact.

What This Means

For investors already positioned in AI semiconductors, Arm's chip pivot represents a potential expansion of the addressable opportunity set — and fund managers like Pleydell-Bouverie appear to view it as a signal that Arm intends to compete for a larger share of AI's hardware economics, not just its intellectual property royalties.