Why Arm Holdings Stock Plunged Today

Core Viewpoint - The AI sector is experiencing a significant decline, with stocks like Arm Holdings and Super Micro Computer facing sharp drops due to disappointing news and broader tech trends [1][2]. Group 1: Stock Performance - Arm Holdings shares have fallen nearly 50% from their peak in February, reflecting a high price-to-sales ratio that reached approximately 50 at one point [3]. - Super Micro Computer's shares plummeted by 23.31% after failing to pre-report revenue, contributing to the negative sentiment in the AI sector [1]. Group 2: Market Dynamics - The AI bubble is not bursting but is deflating, as stocks in the sector are down significantly from earlier highs despite no clear signs of slowing momentum in AI [2]. - The semiconductor sector remains sensitive to broader tech trends, including weak demand for consumer devices like smartphones and PCs, which impacts AI-related stocks [2]. Group 3: Company Insights - Arm's stock is currently expensive on a forward P/E basis at around 75, but the company possesses competitive advantages and accelerating revenue growth driven by AI demand [4]. - Approximately 90% of Arm's stock is held by Softbank, contributing to its volatility in the market [3].