Arm Holdings (ARM -3.24%) stock got hit with another round of sell-offs Friday. The chip company's share price ended the day down 6.6%, according to data from S&P Global Market Intelligence.
Arm stock is losing ground today due to macroeconomic concerns, analyst coverage, and a particularly bad second-quarter report from another big player in the chip space. Bearish macroeconomic news and new skepticism about the artificial intelligence (AI) space also weighed on the share price.
Today's pullback followed sell-offs earlier in the week after Arm's quarterly results and forward guidance failed to match higher-end targets on Wall Street. The company's share price has been highly volatile lately and now trades down roughly 39% from the peak it hit earlier this year. On the other hand, the stock is still up roughly 51% across 2024's trading.
Intel's terrible quarter probably isn't good news for Arm
Intel published second-quarter results after the market closed yesterday, and the report arrived with an onslaught of bad news. The company missed sales and earnings expectations for Q2, and its guidance for the current quarter came in far worse than anticipated. Intel also announced that it was cutting its workforce by 15% and suspending its dividend.
Even though Arm and Intel are competitors, bad news for one isn't necessarily good news for the other. Both companies are looking to AI-focused PCs to be a significant sales and margins driver, but Intel's forecasts suggest that might not be the case in the near term. Rather than reflecting an increased opportunity for Arm to gain market share, investors are seeing less upside in the overall category.
Bearish macro news and rising cautiousness surrounding AI
The U.S. Labor Department released new data showing that non-farming jobs had increased by only 114,000 in July, which was down from growth of 179,000 in June. The update arrived after yesterday's news that new jobless claims had come in higher than expected. While it now seems very likely that the Federal Reserve will cut interest rates in September, some economists think the likelihood of recession is increasing.
The dimming view coincides with a recent shift to more cautious posturing on the AI space taking place on Wall Street. In its recent second-quarter letter, Elliot Management raised concerns that Nvidia and other megacap tech stocks were in bubble territory. The hedge fund also stated that it believed overall expectations surrounding AI had become overblown, citing concerns that the technology isn't advanced enough yet and may not prove to be cost effective in the ways many are anticipating.
