Arm Holdings Plc (NASDAQ:ARM) stock slid about 5% during Thursday’s premarket session as valuation concerns resurface following a recent analyst downgrade, with S&P 500 futures down 0.4% in early trading.

HSBC downgraded Arm to Hold from Buy while lifting its price forecast to $315 from $255, arguing the stock has run well ahead of fundamentals and now offers limited near-term upside. The call comes as investors continue to take profits in richly valued AI and semiconductor names.

Meanwhile, Arm also gained support from Taiwan Semiconductor Manufacturing Co Ltd‘s (NYSE:TSM) stronger outlook and higher capital spending forecast, which signaled continued demand for advanced chip technologies.

TSMC Forecast Lifts AI Chip Sentiment

TSMC raised its full-year 2026 revenue-growth outlook to slightly above 40% in U.S. dollar terms. The company also lifted its 2026 capital budget to $60 billion to $64 billion from $52 billion to $56 billion, with most of the spending directed toward advanced process technologies.

Technical Analysis

With ARM at $263.30, the stock is trading 22.7% below its 20-day SMA ($342.60) and 15.7% below its 50-day SMA ($313.88), which frames the current move as a pullback inside a still-bullish longer-term structure. It’s also trading 14.2% above its 100-day SMA ($231.86) and 44.3% above its 200-day SMA ($183.49), so the bigger trend is still pointing up even after the recent cooling.

Earnings Outlook

The countdown is on: Arm Holdings plc American Depositary Shares is set to report earnings on July 29, 2026 (confirmed).

  • EPS Estimate: 36 cents (Up from 35 cents YoY)
  • Revenue Estimate: $1.27 Billion (Up from $1.05 Billion YoY)
  • Valuation: P/E of 325.9x (Indicates premium valuation)

Top ETF Exposure

  • First Trust NASDAQ-100-Technology Sector Index Fund (NASDAQ:QTEC): 4.57% Weight
  • First Trust Nasdaq-100 Select Equal Weight ETF (NASDAQ:QQEW): 5.06% Weight
  • VanEck Fabless Semiconductor ETF (NASDAQ:SMHX): 5.92% Weight

Significance: Because ARM carries such a heavy weight in these funds, any significant inflows or outflows for these ETFs will likely force automatic buying or selling of the stock.

Price Action

ARM Stock Price Activity: ARM Holdings shares were down 4.95% at $263.30 during premarket trading on Thursday, according to Benzinga Pro data.

Photo via Shutterstock

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