According to Morgan Stanley, semiconductor maker Arm Holdings could play a key role in the rise of “edge AI,” which refers to the deployment of AI models and machine learning on local devices such as sensors and IoT devices, rather than in the cloud. According to analyst Lee Simpson, “This will require real-time processing, support for small language models (SLMs) and secure computing across a range of end markets. With a large number of licensee partners and a large developer community, the ability to scale computing efficiently will be important for Arm.” [is] “We are well positioned to capture value,” Simpson said. With that in mind, Simpson raised Arm Holdings to overweight from equal weight. He also raised his price target to $190 from $107, implying a 20% upside potential from Thursday's closing price. The expanding edge AI environment gives the company opportunities across a range of sectors, from smartphones to cars and even AI PCs, Simpson said. Arm is already in a “strong position” to develop custom chips focused on edge AI for the mobile and automotive sectors, he said. In particular, Simpson sees the rise of automotive chips as a big opportunity, predicting that auto royalties will soar to $1.1 billion by 2030. He also predicts that Arm will capture 42% of the serviceable market for smartphone royalties in fiscal 2027. “We see Arm products as the foundation for our success in edge AI,” Simpson said. Arm shares have more than doubled this year.On Friday, it rose another 2%.
