Arm Unveils New AI Chip, Expects It to Add Billions in Annual Revenue

Arm Unveils AGI CPU, a Pivotal AI Chip Expected to Boost Billions in Revenue

Arm's Strategic Shift and the Launch of the AGI CPU

By Max A. Cherney

Introduction of the AGI CPU

SAN FRANCISCO, March 24 (Reuters) - Arm Holdings announced a new artificial intelligence data center chip on Tuesday which it said will add billions of dollars of revenue and represent a significant shift in the company's strategy.

The new chip, called the AGI CPU, will address data-crunching needed for a specific type of AI that is able to act on behalf of users with minimal oversight, instead of responding to queries as part of a chatbot.

Agentic AI and Market Demand

So-called agentic AI has jump-started demand for the central processing units (CPUs) produced by the likes of Intel and Advanced Micro Devices.

Stock Market Reaction

After shares jumped following Arm's new chip announcement, the stock reversed course and fell 1.5% in mid-afternoon trading. Arm shares have advanced 25% this year ahead of Tuesday's stock move.

Arm's Business Model Evolution

For years, Arm, majority-owned by Japan's SoftBank Group, has relied only on intellectual property for revenue, licensing its designs to companies such as Qualcomm and Nvidia and then collecting a royalty payment based on the number of units sold.

Last year, Arm signaled to investors it was investing in making its own chip, a process that can cost hundreds of millions of dollars, and that the company had hired key executives to assist with the effort. The AGI CPU will be the first chip under that new strategy.

Leadership and Vision

"It's a very pivotal moment for the company," CEO Rene Haas said in an interview with Reuters.

Oversight and Future Plans

The new chip will be overseen by Mohamed Awad, head of the company's cloud AI business, and Arm has additional designs in the works that it plans to release at 12- to 18-month intervals.

Partnerships and Production

Meta Platforms will be the company's lead partner for the AGI CPU and the two companies worked together on the design. Arm's customers for the new chip include ChatGPT maker OpenAI, Cloudflare, SAP and SK Telecom.

Manufacturing Details

Taiwan Semiconductor Manufacturing Co is fabricating the device on its 3-nanometer technology and is made from two distinct pieces of silicon that operate as a single chip. Arm plans to put it into volume production in the second half of this year but has received test chips that function as expected.

"It's back, and it works, and it's doing everything we thought it would," Haas said, referring to the new chip.

System Integration

In addition to the chip itself, Arm is working with server makers such as Lenovo and Quanta Computer to offer complete systems.

Financial Outlook

For its current fiscal year, Wall Street expects Arm to generate a net profit of $1.75 per share on revenue of $4.91 billion, according to LSEG estimates.

(Reporting by Max A. Cherney in San Francisco; Editing by Muralikumar Anantharaman and Nick Zieminski)