Prediction: This AI Stock Will Recover Faster Than Microsoft After the Sell-Off

Core Insights - The semiconductor company Arm Holdings is positioned to recover faster than other AI stocks like Microsoft due to its unique business model focused on licensing and royalties rather than direct chip manufacturing [2][6][12] Business Model - Arm Holdings primarily generates revenue through licensing fees and royalties, with over half of its revenue coming from royalties based on the number of chips manufactured and sold [7] - Unlike traditional chipmakers, Arm is a designer of high-performance processors, which has led major tech companies like Amazon, Google, and Apple to increasingly adopt its designs for their AI applications [5][9] Licensing Agreements - There are numerous licensing agreements that have not yet fully begun to generate royalty revenue, indicating potential future growth for Arm [8][10] - The relationship with Amazon, particularly regarding the Graviton data center processors, exemplifies the deepening reliance on Arm's architecture, which is expected to yield significant royalty income in the coming years [8][12] Market Performance - Despite a recent decline in stock price due to disappointing quarterly results, the long-term outlook remains positive as many royalty agreements are set to start generating revenue soon [12] - Analysts project a modest top-line growth of 7% for fiscal 2026, but anticipate a significant revenue increase of over 23% in the following year, suggesting a strong recovery trajectory for Arm [13]