Investment bank HSBC has issued a warning about the potential risks associated with investing in ARM Holdings. Despite the stock’s impressive 86% rally this year, outperforming the broader semiconductor market, HSBC analyst Frank Lee believes the company’s future prospects are less rosy.
Lee downgraded ARM’s rating from “Hold” to “Reduce” while marginally increasing the price target to $105 from $100. He cited concerns over a potential slowdown in Android smartphone sales, particularly in China, and tempered expectations for the company’s role in the AI market.
The analyst believes that increasing competition from rivals AMD and Intel in the AI processor space could dampen the enthusiasm surrounding ARM-based AI PCs.
ARM is scheduled to release its first-quarter earnings on Wednesday.
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