Is Arm Holdings THE Ultimate Artificial Intelligence (AI) Stock for Long-Term Growth?

Silicon architecture quietly dominates the AI revolution while chipmakers grab headlines.

Processor Blueprint Dominance

Arm's energy-efficient designs power everything from smartphones to data centers—cutting through the AI hardware noise without fabricating a single chip. The licensing model creates recurring revenue streams that bypass traditional semiconductor cycles.

Long-Term AI Infrastructure Play

As neural networks demand specialized processing, Arm's architecture adapts faster than legacy competitors. Their ecosystem approach lets them scale across devices while maintaining software compatibility—a critical advantage when AI deployments fragment across edge and cloud environments.

Investment Reality Check

Every Wall Street analyst suddenly became an AI expert last quarter—but sustainable returns require more than buzzword bingo. Arm's model offers infrastructure exposure without the capital intensity of chip manufacturing, though valuation multiples assume perfection.

The architecture underpinning AI's physical layer keeps evolving—whether investors notice or not.

Image source: Getty Images.

Why Arm is a good long-term bet

Arm has a unique business model in the semiconductor sector. Rather than designing chips or even manufacturing them, the company licenses its CPU designs, collecting money from both a licensing fee and then royalties when the product containing that license sells.

That's been a winning, high-margin business model for Arm, even if it means it doesn't collect as much revenue as it WOULD if it were designing the chips entirely.

It also shows how the company is set up well for long-term growth. First, the company's CPU architecture is much better at conserving battery power than the competing x86 platform fromand. That's why Arm has more than 99% market share of the smartphone market, and its market share is growing in data centers, where power is also at a premium.

Arm's royalties also last for a long time. In fact, half of the royalties it's collecting now come from designs that are more than 10 years old. The company continues to innovate, and it's now getting into chip design and more complex products like system-on-chip (SoC) licenses.

However, its technological advantage in CPU architecture and the strength of its royalty model should ensure that the company continues to grow. It has benefited from the AI boom and will continue to do so, but its advantages make it more resilient than many of its peers.