Apple recently announced the launch of its new iPhone 16 lineup, which will feature generative artificial intelligence (AI) capabilities. This move comes at a time when the demand for AI smartphones is on the rise, with market research firm IDC forecasting significant growth in shipments of generative AI smartphones. As Apple enters this burgeoning market, another company stands to benefit immensely from the iPhone 16 launch – Arm Holdings.
How Arm Holdings Stands to Gain
Apple’s latest smartphones, specifically the iPhone 16 and 16 Plus, will be powered by the new A18 chip developed by Apple. Interestingly, these chips are based on Arm Holdings’ Armv9 architecture, known for its focus on AI, security, and performance enhancements. This shift from the previous Armv8 architecture not only enables iPhone users to experience AI features but also presents a lucrative opportunity for Arm Holdings.
The transition to Armv9 means that Arm Holdings can command higher royalties per chip. According to Arm’s CEO, royalties from the Armv9 architecture could be double that of its predecessor. This increase in royalty revenue has already had a positive impact on Arm’s financials, with a significant year-over-year revenue growth recorded in the first quarter of fiscal 2025.
Anticipated Earnings Growth for Arm Holdings
Arm Holdings is well-positioned to capitalize on the growing demand for generative AI smartphones, given its strong presence in the Armv9 architecture space. Analysts are optimistic about Arm’s earnings growth, with estimates indicating a substantial increase in per-share earnings over the coming fiscal years. This growth trajectory is supported by the company’s strategic alignment with leading players in the smartphone processor industry, including Qualcomm and MediaTek.
Investors looking to leverage the potential success of Apple’s iPhone 16 launch and the broader AI smartphone market may find Arm Holdings as a compelling investment option. With a positive outlook for revenue growth and earnings expansion, Arm Holdings appears to offer long-term growth opportunities for investors.
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