Arm Holdings Stocks Hit Hard Amid AI Sell-Off After ASML's Revenue Decline

Arm shares get spooked

Artificial intelligence stocks have soared in recent months, and Arm has been among the winners. The chip designer, known for highly efficient CPU architecture, has seen revenue growth accelerate from the breakout technology. However, ASML's update this morning threw cold water on the sector and led to a broad sell-off in AI stocks. As one of the most expensive in the sector, Arm got hit hard on the news.

ASML revenue decline and guidance

ASML reported a sharp decline in revenue, and its guidance called for a continued decline in sales in the second quarter. While that news was roughly what Wall Street expected, both the first-quarter revenue number and the guidance missed analyst estimates. ASML expects revenue growth to improve in the second half of the year and accelerate in 2025, but the update shows that demand may not be as strong as expected.

Future outlook for Arm

High expectations are built into Arm stock, trading at a forward P/E ratio above 100. It's not showing the same revenue growth momentum as Nvidia, despite promising AI-related demand. With upcoming earnings reports and market uncertainty, investors face volatility weighing valuation against potential AI growth in the future.