Why Arm Stock Jumped Today

Arm (NASDAQ: ARM) stock posted gains in Thursday's trading. The semiconductor company's share price closed out the daily session up 6.1% amid the backdrop of a 1% increase for the S&P 500 (SNPINDEX: ^GSPC) and a 1.5% gain for the Nasdaq Composite (NASDAQINDEX: ^IXIC).

Arm's valuation moved higher in conjunction with news that the company is expected to launch its first in-house chip this year. Even better, the company has reportedly secured Meta Platforms as the first customer for its new semiconductor line.

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Arm stock rises on in-house chip report

Arm's core business revolves around licensing its architecture and other technologies for semiconductor designs, but the company is reportedly getting ready to launch its own chip designs. According to a report from The Financial Times that was published today, Arm will unveil its first in-house chip this summer.

The new chip is expected to mark Arm's direct entry into the central processing unit (CPU) market. Rather than targeting the consumer market, the CPU is said to be designed for data center servers. The chip will likely be fabricated by Taiwan Semiconductor Manufacturing, and Meta Platforms is reportedly already lined up to purchase the new CPUs.

What's next for Arm?

If Arm winds up directly entering the chip market, it would mark a significant departure from the company's current business model and could open up some powerful new growth drivers. While it's not clear exactly how the move might impact relationships with customers it currently licenses its design architecture to, the move has the potential to be a positive performance catalyst over the long haul.

With its background in semiconductor architecture, Arm has solid foundations for carving out its own place in the chip business. Reports that Meta Platforms has already signed on to purchase Arm's CPUs bodes well for the performance achieved by the chips. Notably, Arm also licenses graphics processing unit (GPU) technologies to Nvidia, so it's possible that the company could wind up developing its own chips in that corner of the artificial intelligence (AI) market further down the line.

If you were on the fence about jumping into Arm stock, today's news looks like a worthwhile buying signal.

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Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool's board of directors. Keith Noonan has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Meta Platforms, Nvidia, and Taiwan Semiconductor Manufacturing. The Motley Fool has a disclosure policy.