Should Arm’s AGI Chip Have NVIDIA Investors in a Panic?

Arm Holdings (NASDAQ:ARM | ARM Price Prediction) is no longer just a provider of blueprints for chips; it’s poised to make a big splash in the chip game, perhaps a bigger one than initially expected, with $15 billion in annual revenue from the new chip currently being projected through 2031.

Undoubtedly, it’s a “significant shift,” according to some analysts over at Citi, and they’re definitely not wrong. And while investors are still hyped about Arm’s AGI CPU and the company’s potential to outsmart its competitors (and, in many cases, its customers) in chips, questions linger as to whether or not its expertise around its own architecture will actually translate to a chip that’s head and shoulders above the Arm chips of its customers, and now, rivals.

Arm’s move into chips is big. But not big enough for Nvidia shareholders to hit the panic button over

Indeed, there does seem to be a bit of a durable competitive advantage to knowing your way around the architecture. And while it’s difficult to gauge the extent of the “architect’s advantage” in these earlier days (it’s just been days since Arm pulled the curtain on its rally-inspiring AGI CPU), especially compared to custom silicon makers that have already done great things with Arm, I do think that Nvidia (NASDAQ:NVDA) shareholders have yet another thing to worry about.

Of course, panicking is never a good idea. In the case of Arm’s chip ambitions, I do think its agentic inference focus could further move the puck away from the likes of the top GPU players. And while the Vera CPU is still a force to be reckoned with, it’s difficult to say how industry dynamics will shift in the next five years. Undoubtedly, if Arm can actually achieve or even exceed $15 billion in annual revenue in five years, that’s valuable CapEx dollars that could have been spent on Nvidia chips.

Why the Arm AGI chip shouldn’t have Nvidia investors startled

In the next five years, though, that’s really quite a small blip for a company like Nvidia, which sees a massive $1 trillion order pipeline from Vera Rubin and Blackwell through next year. In essence, Arm’s move into selling its own chips isn’t that much of a needle-mover, at least for the time being. Of course, AGI chips sound game-changing and could cause some Nvidia shareholders to rush for the exits as the stock falls through its strong level of support. 

Either way, Arm’s entry into agentic inference brings yet another player into the AI chip space. If Arm can outpace its peers with its own chip, the big question is whether the hyperscalers will consider shifting more of their CapEx over as the inference inflection point hits. In the meantime, Nvidia seems to be making a lot of moves to secure some pretty good seats to the inference boom.

For now, Nvidia investors need not worry about Arm, as its many customers, Nvidia included, look to take on a more rival-like role. Though keeping tabs on Arm’s developments as well as the rest of the chip plays seems to be a must for investors as Nvidia enters its most challenging period in a number of years. 

The bottom line

After tumbing into a bear market (that’s a 20% fall from its peak) to $165 and change per share, Nvidia stock trades at around 20.0 times forward price-to-earnings (P/E). There’s a lot of nerves involved with the name, but when it comes to increased competition in the AI chip space, it seems like none are credible share-takers quite yet, such that Nvidia’s $1 trillion sales target is at risk.