Arm CEO says tech selloff reflects short-term thinking on AI

Arm Holdings CEO Rene Haas has a message for the investors dumping tech stocks: you are thinking too small.

Haas said the recent tech selloff reflects short-term thinking that follows the US midterm elections. In his view, that thinking overlooks the large long-term economic potential of artificial intelligence. It is a bold stance, given that his own company’s stock was among those getting sold.

A record quarter, and a stock that fell anyway

Haas made the comments alongside Arm’s fiscal second-quarter earnings. On paper, the results looked like a victory lap.

Arm reported record revenue of $1.44 billion, a 27% increase year-over-year. That figure beat analysts’ expectations. Licensing revenue was a standout, jumping 50% to $773 million.

Licensing is the upfront fee chip designers pay to use Arm’s architecture. A 50% surge there suggests a lot of new designs are being planned.

Smartphone royalties came in at $670 million, growing just 8%.

That number fell short of what the market wanted. Arm’s shares declined by approximately 5-12% after the report. The main culprit was the weaker-than-expected smartphone royalty figure.

Broader worries piled on, too. Investors have been questioning whether the massive spending on AI infrastructure will produce returns. Supply constraints added another layer of concern.

Haas makes the long-term case

Haas framed the selloff as a timing problem rather than a fundamentals problem. He described intelligence as a commodity, one that could contribute substantially to GDP growth.

He also pointed out that enterprise AI deployment remains in its early stages. Most of the AI spending so far has come from building the infrastructure.

To back this up, Haas pointed to momentum in Arm’s data-center segment. The company is targeting $2 billion in AGI CPU revenue across fiscal years 2027 and 2028. Arm says it is confident about reaching that level of demand.

The company also expects data-center revenue to overtake smartphone revenue within a few years. Arm is aiming for 60% market share by year-end.

What this means for investors and the sector

The immediate takeaway is that strong headline numbers are no longer enough. Arm beat expectations on revenue and still saw its stock fall. The market is scrutinizing the mix of revenue, not just the total.

Watch the royalty line closely in coming quarters. Licensing revenue today is a leading indicator of royalty revenue later. The 50% licensing jump is the strongest evidence Arm has for its long-term thesis.