Morgan Stanley Just Downgraded Arm Stock on Chipmaking Pivot. Why, and Should You Sell ARM Now?

For decades, Arm Holdings plc (ARM) has been designing chip architectures and licensing them to the world’s biggest players, earning steady royalties without ever making chips itself. But now, the company is shifting gears.

It has begun developing its own physical silicon, introducing an AI-focused data center CPU tailored for agentic workloads, where CPUs act as the always-on coordinators alongside GPUs. This move signals a deeper push into vertical integration, aiming to capture more value from the artificial intelligence (AI) boom, even if it means stepping into the arena with its own customers.