The artificial intelligence (AI) revolution has powered a strong rally in several stocks over the past few years, as companies rush to position themselves for this transformative trend. However, not every AI-related stock has managed to sustain momentum. And one notable example is chip designer Arm Holdings (ARM). Arm kicked off 2025 on a high note. The company was among several high-profile names linked to the Stargate Project, a massive $500 billion AI infrastructure initiative that brings together industry giants such as Nvidia (NVDA), Oracle (ORCL), OpenAI, and SoftBank Group (SFTBY).
That association initially boosted optimism around Arm’s long-term growth prospects in the AI ecosystem. But as the year unfolded, sentiment began to cool. Arm finished 2025 deep in the red, pressured by rising fears of an AI bubble and concerns over the stock’s stretched valuation. In addition, investors appear uneasy about SoftBank’s margin loan backed by its ARM shares. In the event of a broader AI sell-off, the risk of forced selling has added another layer of anxiety, one that could quickly amplify downside pressure.
