We recently published a list of 10 Hottest Mega-Cap Stocks of 2025. In this article, we are going to take a look at where Arm Holdings plc (NASDAQ:ARM) stands against other hottest mega-cap stocks of 2025.
In 2024, companies poured money into Artificial Intelligence infrastructure in a bid to outpace each other in the AI race. The communication services and information technology sectors led the the large-cap stocks in terms of returns. AI-driven hype was so significant that for the first time since 1998, the S&P’s large-cap index registered two consecutive years of 20%+ gains.
2025 may well be the year of reckoning for AI. Some analysts have questioned the massive AI spending throughout the last year. Their concerns and predictions were dealt a reality check though when Bill Gates’ tech giant announced it planned to spend $80 billion on AI in fiscal 2025. Consequently, semiconductor stocks rallied, reminding everyone that the AI rally wasn’t over by any means.
Not surprisingly, the list is dominated by chipmakers, who we believe will be critical to the market’s returns this year. To come up with the 10 hottest mega-cap stocks of 2025, we considered stocks with at least $75 billion market capitalization.
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Arm Holdings plc (NASDAQ:ARM)
ARM Holdings plc (NASDAQ:ARM) has taken off this year, gaining 10% in a single day to end the week at a high. The company continues to benefit from a unique business model that is at the heart of chip-making technologies of various semiconductor companies.
ARM Holdings (NASDAQ:ARM) spent just 6% of its last quarter’s revenue on CAPEX. It makes money by licensing its chip designs as well as royalties from chip sales. This also allows it to record a stable financial performance through passive recurring revenues. In an industry that is otherwise very capital intensive, ARM’s business model helps it survive downturns while benefiting from the good times.
As these good times are expected to continue in 2025, the company’s strong positioning will continue to make it a solid semiconductor bet. Investors would still want to keep an eye on technological developments though. It faces an existential threat from an open source architecture called RISC-V. Qualcomm, which only last month won a licensing dispute against ARM, is actively pursuing this technology, so volatility is expected as this technology develops.
As expected, the hottest stocks for 2025 are almost all beneficiaries of the Artificial Intelligence revolution. The revolution is only just getting started and investors and analysts alike expect a year of great technological advancements ahead.
Overall, ARM ranks 1st on our list of hottest mega-cap stocks of 2025. While we acknowledge the potential of ARM as a leading AI investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. If you are looking for an AI stock that is as promising as ARM but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.