Arm Stock Took a Hit Because Investors Fear Nvidia Might Poach Its CEO. Is It Time to Sell?

Shares of Arm Holdings (NASDAQ:ARM) fell about 5% to roughly $189 on Friday afternoon after the Financial Times reported that Nvidia's (NASDAQ:NVDA) board had approached Arm CEO Rene Haas about succeeding Jensen Huang, who resigned as Nvidia's CEO on Thursday.

Nvidia's board pushed back later in the day, saying it has not formally engaged with any potential candidates and called speculation about a successor premature, CNBC reported.

So nothing is decided. But the report forced Arm investors to think about something they might not have yet considered: Arm without Haas.

Image source: Getty Images.

Why Haas matters so much to Arm

Haas knows Nvidia well. Before joining Arm in 2013, he spent seven years at Nvidia as vice president and general manager of its computing products business, according to Arm's annual report. He became Arm's CEO in February 2022 and led it through its 2023 IPO.

Under Haas, Arm has moved well beyond designing chips for smartphones. It now sells its own data center processor, the Arm AGI CPU, and the company says demand is "extremely strong." In its latest shareholder letter, Arm said it is increasingly confident the chip can generate up to $2 billion in revenue over its 2027 and 2028 fiscal years.

Arm itself flags the risk of losing him. Its annual report says the company is "particularly dependent on our senior management team, including Mr. Haas."

The business is in good shape

Arm's most recent quarter, which ended Sept. 30, was its best second quarter ever. Revenue rose 27% from a year earlier to $1.44 billion. License revenue jumped 50% to $773 million, while royalty revenue grew 8% to $670 million, and data center royalties doubled.

Arm also said its share of servers at the top cloud companies jumped from 15% in 2024 to more than 50% in 2025, and it expects that to top 60% by the end of 2026. Nvidia is part of that story: its Vera processor is built on Arm technology.

Wall Street mostly liked the results. After the report, Piper Sandler called it a solid quarter and kept its Overweight rating, while JPMorgan said licensing strength offset softer smartphone royalties. TD Cowen said Arm's progress on supply gives it more confidence the AGI CPU can bring in closer to $2 billion in its first year than its original $1 billion goal.

Most firms trimmed their price targets anyway, citing lower valuations across chip stocks. New targets range from $230 at Bank of America, which rates the stock Neutral, to $330 at Mizuho. That suggests there’s still plenty of upside from Arm’s current price of about $190.

The risks for Arm investors

A CEO exit would hurt, but Arm wouldn't be leaderless. SoftBank Group owns about 86% of Arm, so it would effectively pick the next CEO. That control could be a risk in itself, since small shareholders might have little say. Haas has also already split his time: since April, he has run SoftBank Group International part-time while remaining Arm's CEO.

Valuation is the other worry. Analysts cut their targets this month because valuations across chip stocks are shrinking, rather than because of anything Arm did. If that trend continues, Arm's shares could keep sliding even while the business grows.

Should you sell?

Not on a single report. Nvidia's board says it hasn't formally engaged candidates, and Haas hasn't commented. Arm's growth comes from the whole industry building on its designs, and that won't change overnight.

If you own Arm, watch for any statement from Arm or SoftBank about Haas's plans. If you've wanted to own one of the best-positioned semiconductor stocks for the AI era, a dip driven by headlines rather than the business may be worth a closer look. Just keep the position manageable enough to ride out the uncertainty.

Jonathan Ponciano has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Arm Holdings and Nvidia. The Motley Fool has a disclosure policy.