Considering the impact ARM has on the world of communication/social media, $40B was a gross undervaluation. Idiot Musk should've gotten ARM instead of Twitter.
Then I could have watched with glee with yummy popcorn how he pushed everyone to embrace RISC-V.
"Impact" is not how investors value companies, profits are. ARM was overvalued at $40B, and is massively overvalued at $100B. They will need to demonstrate an ability to generate several billion dollars in profit every year, with reasonable prospects for near double digit growth in the short to medium term to justify a $100 billion valuation. That doesn't mean the price will go down - as Buffett says about short selling "the market can remain irrational longer than you can remain solvent" but investing in it is basically playing the hype train - relying on a greater fool to buy your shares at a higher price than you paid for them. It is not a proper investment where the company is seeing returns that justify its valuation, and the stockholders are compensated either via dividends or via buybacks that increase their relative share of the overall company's stock.
How is ARM going to be able to raise prices enough to justify that valuation, without inviting competition from RISC-V or other alternatives that may appear that do not charge any royalties at all? They said they were on track to "double" licensing revenue with ARMv9 (at least that's how I read their statements) but they need to way more than double their revenue to make the kind of profit they need to make. Maybe they were only talking about architectural licensing revenue, but they make so little from Apple and other architectural licensees that doubling it isn't getting them too far.
Most of their money comes from core licensing, so they'll need to way more than double their revenue from that source. That's also the market most likely to move to RISC-V, on the lower end at first (which is already starting to happen in the embedded market) and eventually to consumer facing gadgets like phones. Google has been working on making RISC-V a "first class citizen" Android port, so if there aren't already Android phones using RISC-V there soon will be. It'll start on the very low end (sub $50) sold in the third world where saving even a few pennies in core licensing matters, but move up from there.
Let's say someone invented a way to do fusion power in a form factor that could power a home, including heating, charging your EV, etc. (a "Mr Fusion") cheaply and decided they cared more about changing the world than becoming a trillionaire. So they charge $1 more than their cost of manufacture. The "impact" of that company is off the scale, it makes ARM (and everyone else) look like a company selling plastic dog poop gag gifts by comparison, but it will not deserve a valuation even as high as ARM, let alone as high as Nvidia or Apple, because it will not be producing billions in profits every year as far as the eye can see.
docs.google.com
