Jefferies Lifts Arm's Target to $320 on AI Chip Demand — But Is the Street's Most Conservative Bull Enough?

Shares shifted sharply higher as Arm Holdings surged 5.3% to $283.80 on July 21, after Jefferies raised its price target to $320 from $290, arguing that orders for Arm's AI-focused CPU have risen further since full-year results as agentic artificial intelligence fuels demand for processors. The upgrade lands amid a broader chip-sector bounce, but Jefferies' target is notably one of the lowest among Arm's bulls — raising the question of whether even the cautious optimists are underestimating what's ahead.

$18 Billion Revenue Bet Tops Arm's Own Guidance

Jefferies now forecasts revenue from Arm's AI CPU of $18 billion in the 2031 financial year, above the company's own guidance of $15 billion. That 20% premium over management's projections signals the bank sees customer commitments accelerating faster than Arm itself is willing to promise. It expects Meta to be the biggest customer, followed by OpenAI, Oracle, and ByteDance, with Oracle and ByteDance among recent signings. For shareholders, the customer roster matters: each new hyperscaler locks in years of royalty revenue tied to chip shipments.

The CPU Market Just Doubled in Size — On Paper

At its Arm Everywhere event in March, the company put the total addressable market for CPUs by 2030 at more than $100 billion, but Jefferies said estimates have since expanded to $200 billion. A market that doubles in the span of months reflects how quickly AI workloads are reshaping the data-center buildout. Jefferies forecasts a five-year earnings-per-share compound annual growth rate of 45% — a pace that, if achieved, could justify the stock's steep valuation far beyond today's price.

Higher Royalties Per Chip Boost Revenue Quality

In the data centre, royalty rates are rising, with royalties increasing to $1.50 per core from $1 previously. That 50% jump per core compounds across millions of chips. Jefferies also expects SoftBank, Arm's majority owner, to launch a graphics processing unit next year using Arm's design services, estimating royalties could exceed $7,000 per chip. If volumes materialize, that single product line could become a meaningful earnings driver.

Jefferies Is Actually the Low End of Arm's Bull Camp At $320, Jefferies sits well below Bernstein and Mizuho, both at $500, and KeyCorp at $430. With Arm reporting fiscal Q1 results on July 29, the earnings print will test whether AI demand is translating into booked revenue or remains a forward promise. Arm has acknowledged that demand is constrained by foundry capacity and memory availability, a bottleneck that could cap near-term upside even as the long-term story strengthens.