Intel's blowout quarter showcases the exact reason why we took a stake in Arm
Arm’s stock surged over 14% Friday on the heels of Intel’s blowout quarter. But Jim Cramer said there is still further room for Arm to run. Intel’s report Thursday evening revealed booming demand for CPUs, or central processing units, validating the very reason the Club initiated a position on Arm on Monday. Arm’s stock has surged more than 34% since our buy around $173. Shares of Arm hit another all-time high Friday. For its part, Intel shares surged more than 20% Friday, adding to its blistering rally this year. “I think Arm’s numbers are going to be gigantic. Wow,” Jim said Thursday morning on CNBC. For a long time, the AI compute boom remained centered around graphic processing units, or GPUs, like those made by Club name Nvidia . But the story has been shifting in recent months, and CPUs are quickly becoming hot-ticket items. Driving the change: more AI computing is moving to the daily inference stage from training, and newer AI models are capable of taking actions on behalf of users — known as agentic AI — rather than simply answering their queries. Intel’s earnings report illustrated this evolution in a massive way. “In recent months, we have seen clear signs that the CPU is reasserting itself as the indispensable foundation of the AI era. CPU now serves as the orchestration layer and critical control plane for the entire AI stack,” CEO Lip-Bu Tan said on Intel’s earnings call Thursday evening. “I think the ratio of CPU to GPU used to be 1 and 8, and now it’s 1 to 4, and I think towards parity or even better,” Tan added. In a separate conversation with Tan, Jim said the Intel CEO told him that the industry is years away from catching up the insatiable appetite for CPUs, which has long been Intel’s bread-and-butter chip. That kind of prolonged supply-demand imbalance sounds like we’re referring to memory chips made by the likes of Seagate , Western Digital , Sandisk . But those dynamics are affecting the CPU market now too, Jim said. “Instead, you should be thinking [of] AMD , Intel, and Arm,” he said on Friday’s Morning Meeting . AMD and Intel have long been rivals in the data center CPU market. Arm is the newcomer with its first in-house chip. Historically, Arm’s business model was built on licensing its Arm instruction set — basically, a language that tells the processor how to operate — to other chipmakers, collecting royalties in the process. Consider: An iPhone relies on Arm’s instruction set, but Apple’s engineers are the ones who design the chip. With its new AGI CPU, Arm designed the chip itself. Arm announced the chip in March , and fellow Club name Meta is its debut customer. There’s been a lot of excitement around the endeavor, not just from the Club. In less than a week, Arm has already blown past our initial $200 price target, and for Jim that means one thing: we have to raise it. Director of Portfolio Analysis Jeff Marks is reviewing what it should be. “The reason why I say you have to is because” of the new CPU, Jim said, praising Arm CEO Rene Haas’s foresight. “I didn’t see it coming, but Rene Haas did. He wants to build his own and can build his own because he saw the demand.” (Jim Cramer’s Charitable Trust is long ARM . See here for a full list of the stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust’s portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.
