Arm Holdings has introduced a new artificial intelligence chip for data centres, a move the company says could generate billions in annual revenue and mark a significant evolution in its business strategy.
The processor, known as the AGI CPU, is built to support the heavy computing demands of emerging “agentic AI” systems, technology capable of carrying out tasks independently with minimal human input, rather than simply responding to prompts like traditional chatbots.
Growing interest in this form of AI has already fueled demand for processors produced by industry giants such as Intel and Advanced Micro Devices.
Investors reacted positively to the announcement, sending Arm shares up 6.5% in after-hours trading. Despite a slight 1.4% dip at market close on Tuesday, the stock has gained roughly 22% since the start of the year.
For decades, Arm (majority-owned by SoftBank Group) has primarily generated revenue by licensing its chip designs to companies including Qualcomm and Nvidia, earning royalties based on shipments. The launch of its own chip signals a shift toward a more capital-intensive model, as chip production can require investments of hundreds of millions of dollars.
“This represents a pivotal turning point for us,” said CEO Rene Haas.
The company estimates the AGI CPU could bring in about $15 billion annually within five years. Over the same period, Arm expects total revenue to reach $25 billion, with earnings per share projected at $9. Its licensing business is also anticipated to grow significantly, potentially doubling in size.
Development of the new chip is being led by Mohamed Awad, who heads Arm’s cloud AI division. The company also revealed plans to introduce additional chip designs on a regular cycle of 12 to 18 months.
Meta Platforms is acting as the primary partner for the AGI CPU, having worked alongside Arm on its design. Other early adopters include OpenAI, Cloudflare, SAP, and SK Telecom.
Production of the chip is being handled by Taiwan Semiconductor Manufacturing Company using its cutting-edge 3-nanometer technology. The design combines two separate pieces of silicon into a single functioning unit. Arm says early test versions are performing as expected, with full-scale production planned for the second half of the year.
“It’s back, it works, and it’s delivering exactly as we anticipated,” Haas said.
Beyond the chip itself, Arm is collaborating with hardware makers such as Lenovo and Quanta Computer to roll out complete server systems.
For the current fiscal year, analysts expect Arm to report earnings of $1.75 per share on revenue of $4.91 billion, according to LSEG estimates.
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