Shares of Arm Holdings have tumbled nearly 40% from their 52-week highs and roughly 43% from their peak earlier this year, fueling investor concerns. The stock currently hovers just above the $100 level, a price not seen since the post-Liberation Day sell-off of 2025. Despite the recent downgrades tied to overvaluation worries, Susquehanna raised its rating on Arm after management unveiled several strategic initiatives, arguing that the shares offer upside potential given the firm’s dominant position in chip architecture.

In a major restructuring move, Arm has established a dedicated Physical AI division to target markets such as humanoid robotics and autonomous vehicles. The new unit will leverage Arm’s existing architecture licensing model, aiming to capitalize on the expected surge in demand for edge processors with built-in AI inference capabilities. Management forecasts that Physical AI could contribute up to 15% of Arm’s licensing revenue by 2028 if adoption in smart robotics reaches current industry projections.

Speaking at the World Economic Forum in Davos, CEO Rene Haas highlighted infrastructure bottlenecks as a key hurdle to AI growth. He noted that while North America has sufficient power generation to support data-center expansion, constraints in transmission lines and lengthy permitting processes are delaying AI deployments. Haas warned that without accelerated grid upgrades, hyperscale operators could face capacity shortfalls by 2027, potentially slowing the rollout of next-generation AI services.