Arm stock surges 24% over IPO price after Nasdaq debut

British chipmaker Arm (ARM) debuted on the public markets on Thursday, opening at $56.10 on the Nasdaq in afternoon trading.

Arm’s shares jumped 10% right as trading began and climbed over 20% to above $61 in the first 30 minutes of trading. The stock closed up nearly 25%. Going into the IPO, shares were priced at $51 each.

The company opened trading with a $54.5 billion valuation, but the company’s market cap already has jumped north of $60 billion.

“This is a great first step to reopening what has been sort of an 18-month drought of IPOs in the US tech market,” Blueshirt Group managing director Mark Roberts told Yahoo Finance Live on Thursday.

The chipmaker’s go-public is the most high-profile IPO that the Nasdaq has seen since 2021’s IPO boom, which cycled into a bust in 2022.

Since then, the IPO market has been relatively quiet, picking up slowly with the IPOs of beauty company Oddity (ODD) and Mediterranean restaurant chain Cava (CAVA) over the summer. That trickle has grown into, at minimum, a stream of IPOs, with Arm’s opening and the recent filings of Instacart (CART) and Klaviyo.

“This could be a lot more important than people realize,” Miller Tabak strategist Matt Maley told Yahoo Finance Live ahead of the IPO on Thursday. “If [Arm] does well, that’s certainly going to help open up things for a market that’s been dormant for over a year now. It’s also going to tell us something about this whole thing with AI. There’s still plenty of hype surrounding it but not the big euphoria.”

ARM Holdings CEO Rene Haas, center, rings the Nasdaq Opening Bell at the Nasdaq MarketSite, during his company's IPO, in New York's Times Square, Thursday, Sept. 14, 2023. (AP Photo/Richard Drew)

Arm Holdings CEO Rene Haas, center, rings the Nasdaq Opening Bell at the Nasdaq MarketSite during his company’s IPO, in New York’s Times Square, Thursday, Sept. 14, 2023. (Richard Drew/AP Photo)

However, just because these IPOs are moving doesn’t mean their valuations are not a sticking point. In Arm’s case, the company reportedly sought a valuation of between $60 billion and $70 billion.

Likewise, Instacart — valued at $39 billion at the close of its 2021 funding round — is reportedly now seeking a $9.3 billion valuation.

Arm’s public debut “is a bellwether, but it needs a little bit more than just one company to list to give the sense of a shift,” Crunchbase senior data editor Gené Teare told Yahoo Finance.

What Arm does

Arm is a unique company, especially among tech companies. As a chip designer, Arm’s customers include some of the biggest names in tech, including Apple (AAPL).

“It’s a one-of-one company,” Rainmaker Securities managing director Greg Martin told Yahoo Finance Live. However, he added, “we have to be very careful. It’s obviously a ubiquitous chip design in 99% of our smartphones. It didn’t grow last year, but it has huge growth potential … in AI.”

The company has been through a number of transitions over the last several years. In 2016, SoftBank acquired Arm, taking it private for around $30 billion. In 2021, Nvidia (NVDA) attempted to acquire Arm in a deal that failed after regulatory tussling for almost a year and a half.

Recently, Arm has sought to shift its revenue model, altering pricing and rolling out a changed customer licensing strategy.

“They’re shifting their focus a little bit away from the smartphone area and toward AI,” Maley said. “Even though it’s a little irregular, I think it’s a smart way to go.”

In short, Arm’s return to the public markets on Thursday was a high-stakes moment.

“If this IPO kind of falls flat a little bit, that could present some problems for the tech sector overall,” Maley said. “On the flip side, if it does very, very well, maybe that can help the tech sector that’s been kind of trading in a sideways range for a couple of months now.”

Allie Garfinkle is a Senior Tech Reporter at Yahoo Finance. Follow her on Twitter at @agarfinks and on LinkedIn.

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