BofA Securities' Vivek Arya reacts to Arms Q4 earnings

The SMH, that’s the ETF is up 4% just last week, 25% year to date. Our next guest says the broadening rally is an encouraging sign and strengthen auto and industrial semis is a notable trend. The Vicaria B of A security semiconductors analyst joins us now. Vivec, you know, First off, I’d just love to get your take on the one earnings report we got this morning which is ARM. I think you do, you cover the company stock is down about 4 1/2 or so percent. What, what do you think? Yes, good morning, David. So interesting cross currents in semis stocks that are related to the data center and AI, the demand is very hot, but the stocks can get crowded from time to time, whereas the stocks that are exposed to automotive and industrial markets, demand is a little loop form, but it’s starting to through. But we do think that that can help to broaden the rally in those stocks over the next few quarters. Now specific to ARM, we really like it for the reason that it is one of the most unique ways to get exposure to the adoption of AI at the edge of the network. You know, usually when we think of AI, we think about what’s happening in cloud computing, we think of NVIDIA, we think of Broadcom, but usually you will. But now you will start to see AI and intelligence spread to the edge of the network. And we think ARM is one of the most unique ways to access that. That means every PC, every smartphone, every consumer device is going to have that small bit of distributed intelligence. And the blueprint of that I think comes from ARM. The adoption of their V9 architecture is just in the 1st 20% of its rollout beating that double S you know, top line growth you heard from management themselves earlier today, 20 plus percent top line growth. So the stock does trade at a premium multiple. There is a small float, so the stock does get volatile. But I don’t think we should confuse volatility for the fundamentals of the company that are very strong. Yeah. And overall for the industry, I mean again we did have Renee Haas join us not long ago, few, few few moments ago. You know they continue to talk about significant momentum in the data center. And it’s always seemed to hear obviously all of the hope and hype around Blackwell and what that’s going to mean for the overall industry. Not to mention so many of these data centers just continue to be built. Is it all real? Is it going to come to the fore of the next two or three years in terms of the demand picture? Yeah, so I’ll make two points there, David. So first is just set aside what the chip companies are saying, you know, because they have a vested interest in saying so look at what their customers are saying and look at what importantly they’re doing. Look at the capital expense raise, the CapEx raise from the top cloud companies this year, what Google is doing, what Microsoft is doing, what Amazon is doing, what meta is doing. Last year we thought cloud CapEx could grow 20% this year. Then before this earnings period, we raised it to 26% and now we are looking at 35 to 40% CapEx growth this year with continued CapEx growth next year. Why is that? Because I think these top customers realize that deploying this AI infrastructure is a massive productivity boost, right, both for their own internal services, but also as they are setting these services and providing the infrastructure for enterprise, right. We heard that from ServiceNow yesterday. So think of AI as this massive productivity enhancement tool and then companies such as NVIDIA and ARM and Broadcom and Marvel, right and others, they are providing the basic tools to do so. So like I said, these stocks can sometimes get ahead of themselves, they can sometimes get crowded. But when it comes to the adoption of AII think we are just in year one or two of what could be a multi year investment cycle. And again, it is a productivity enhancement tool and I think the change of these networks from the traditional way over to an accelerated manner, I think it is massively beneficial to semiconductor companies.