Arm’s (ARM:NASDAQ) shares surged again overnight, extending last week’s rally as investors continue to cheer the chipmaker’s better-than-expected third-quarter earnings and its exciting potential as an emerging power play on AI (artificial intelligence).

The stock closed Monday’s session on Wall Street at $148.97, up 29% on the day. It means that the company’s market cap has roughly doubled since Wednesday last week (7 Feb) following its $52 billion blockbuster Wall Street debut in September 2023.

That’s a rare feat made all the more impressive given its scale. Were it listed in London, Arm would be the third largest company on the FTSE 100, overtaking HSBC (HSBA) overnight.

HOT GROWTH FROM AI

The company reported a better-than-forecast 14% revenue increase in its December quarter revenues and now projects sales will rise as much as 20% for fiscal 2024 (to 31 March).The real kicker, in theory, was Arm’s reminder that AI-focused chipmakers will be using its blueprints, a development that’s predicted to pull revenue 15% above analysts’ expectations to roughly $900 million this year.

Whether Arm can match these elevated growth demands, time will tell, but there is a very good reason for ordinary investors to tread carefully in the short-term.

Japanese majority owner Softbank sold just 10% of its stake to investors in the IPO which means stock available to buy on the open market remains relatively tight, which magnifies any movement up or down. Lock up restrictions on early shareholders expire next month, increasing the amount of stock that can be traded. That may be telling, and it’s not hard to imagine a number of those stakeholders top-slicing some of the near-200% profit now on the table.

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