Why Did Goldman Sachs Downgrade Arm Holdings Stock?

The change reflects the firm’s view that Arm’s business model may not benefit as strongly from expanding spending on artificial intelligence (AI) as others in the semiconductor sector.

• Goldman Sachs trimmed Arm’s price target to $120 from $160.
• The firm believes Arm is less directly positioned to capture the upside compared with companies more deeply tied to AI hardware production.
• Goldman Sachs emphasized Arm’s limited leverage to the AI cycle.

Goldman Sachs downgraded Arm Holdings’ (ARM) stock to ‘Sell’ from ‘Neutral’  and trimmed its price target, signaling growing caution about the chip designer’s prospects amid shifting industry demand. 

The firm lowered its one-year price target to $120 from $160, according to TheFly. 

AI: The Market Driver

The change reflects the firm’s view that Arm’s business model may not benefit as strongly from expanding spending on artificial intelligence (AI) as others in the semiconductor sector.

Goldman’s assessment comes as hyperscale spending on AI infrastructure continues to grow. Still, the firm believes Arm is less directly positioned to capture that upside compared with companies more deeply tied to AI hardware production and memory demand. 

Arm’s stock traded over 3% lower in Monday’s premarket. On Stocktwits, retail sentiment around the stock remained in ‘bearish’ territory amid ‘normal’ message volume levels. 

Analyst’s Rationale 

Goldman Sachs emphasized Arm’s limited leverage to the AI cycle and highlighted the company’s ongoing shift in its business model as a factor that could weigh on growth.

For the second quarter (Q2) of fiscal 2026, the company reported revenue of $1.14 billion and adjusted earnings per share (EPS) of $0.39. Both revenue and EPS exceeded the analysts’ consensus estimates of $1.06 billion and $0.33, respectively, according to Fiscal AI data. With respect to the Q2 EPS, ARM now trades at over 300x the earnings. 

Meanwhile, according to Goldman Sachs, the broader digital and storage segments remain bright spots for chip makers tied to AI investment trends. 

ARM stock has gained over 6% in 2025 and declined over 9% in the last 12 months. 

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