Advanced Micro Devices and ARM Holdings are surging because hyperscalers need CPUs to run AI models. UBS says the stocks will go higher. Congratulations to everyone involved on understanding that computers require processors.
The thesis here is airtight. Companies buy chips. Chips go in data centers. AI runs on those chips. Stock goes up. This is the kind of analysis you get when you pay UBS their management fee instead of just buying an index fund and forgetting your password.
Hyperscalers are ordering more CPUs. Not GPUs for training. CPUs for inference. Because apparently after you spend eight hundred million dollars teaching a language model to write mediocre marketing copy, you need a different kind of expensive chip to actually deploy the thing. The AI revolution has more dependency chains than a Bitcoin maximalist's conspiracy theory.
AMD makes the chips. ARM licenses the architecture that goes inside some of the chips. Both companies exist in the physical supply chain. UBS looked at purchase orders, saw numbers going up, and declared this bullish. They could have saved time by just checking if electricity was still being produced.
Retail traders are now piling into ARM at a forty-seven forward P/E because an analyst said demand looks strong. Strong compared to what? Strong compared to last quarter when demand also looked strong and the stock ran up twelve percent in four days before giving it all back when NVIDIA sneezed during an earnings call?
The CPUs are for inference workloads. That means running the AI model after it has been trained. Every chatbot query. Every AI-generated image of a dog wearing sunglasses. Every time someone asks ChatGPT to write their resignation email. Each request burns a few CPU cycles and makes ARM and AMD shareholders feel like geniuses.
UBS sees more gains ahead. They published a price target. The stock moved. Everyone forgets this happened in three weeks when a different bank publishes a different price target going the other direction.
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