Arm Holdings PLC (NASDAQ:ARM) fell almost 9% on Thursday after Bernstein analysts hit the chip maker with a downgrade on near-term headwinds outside of the artificial intelligence (AI) sector.
“It is well understood that most things AI are holding up fine,” Bernstein acknowledged in a note.
However, “we worry about the revenues outside of AI, given the cyclical headwinds our analog names are facing,” analysts added.
Arm was bumped from a ‘market perform’ to ‘underperform’ rating as a result, with Berstein noting “we struggle to find upside”.
Long-term, the equity story remained “appealing” Bernstein said, though Arm was labelled as not “immune to [...] cyclical headwinds” given challenges in the likes of the automotive and industrial sectors.
Arm shares had been hit earlier this month as reports emerged of the company canceling an architectural license with Qualcomm, which allows it to create chips based on the former’s designs.
Jefferies analysts noted a “protracted legal process” was likely as a result before any settlement was reached.
Shares fell 9% to $140.70 on Wednesday.