Arm Holdings stock jumped on Wednesday after investment bank Morgan Stanley labeled it a "new top pick."
Chip designer Arm will benefit from Apple using the Arm v9 architecture in the iPhone 16 processor, A18, analyst Lee Simpson said in a client note.
"Arm remains our favored play on the emerging edge AI opportunity," he said. "We expect mobile to drive initial upside, followed by infrastructure and autos."
Simpson reiterated his overweight rating on Arm stock with a price target of 175.
On the stock market today, Arm stock jumped 10.3% to close at 140.32.
Arm Stock Gains From Edge AI Shift
As the focus of artificial intelligence moves from data centers to network edge devices, like smartphones, Arm is poised to increase its sales from royalties and licensing, Simpson said.
"We expect the growing use of v9 cores, as well as a shift to more custom silicon work, to be a feature of mobile growth," Simpson said.
Apple's use of the Arm v9 architecture in the A18 processors likely includes CPU extensions, he said. Those extensions balance resources among the central processing unit (CPU), neural processing unit (NPU) and graphics processing unit (GPU).
Arm stock and Apple stock are on the IBD Tech Leaders list.
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