(Bloomberg) -- Arm Holdings Plc shares fell on Monday, after Bernstein started coverage on the newly public chip designer with an underperform rating, suggesting it may not be the beneficiary of artificial intelligence that some investors may expect.
The stock fell 9.3% to $55.10 on Monday, in what is its third trading day. With the decline, the stock is now below the $56.10 price it opened at following its Thursday initial public offering. Bernstein’s price target of $46 implies additional weakness.
“While expectations that Arm will be a beneficiary from AI growth may be adding a premium to the share price, we believe it is too soon to declare them an AI winner,” wrote analyst Sara Russo. “With the mobile end market maturing, we think expectations for top line growth are too optimistic.”
Bernstein is only the third firm to start coverage on Arm, and so far ratings are evenly distributed. Aside from the firm’s sell-equivalent rating, New Street Research recommends buying the stock while Needham has a hold rating on the shares. Needham analyst Charles Shi wrote that the valuation “looks full”.
Arm’s Monday decline stood in contrast to the sector overall. The Philadelphia Stock Exchange Semiconductor Index rose 0.7%. Among notable gainers, Intel Corp. rose 1.2% and Advanced Micro Devices Inc. added 1.1%.
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