Sustainable Growth Advisers, LP - Global Growth Composite on Arm Holdings plc
Thesis
SGA views Arm as a long-term compounder benefiting from the proliferation of AI and power-efficient computing. Licensing growth, expanding royalties, increasing adoption of Arm-based CPUs, data-center penetration, and share gains against x86 architectures provide multiple growth drivers. The business combines strong pricing power with highly recurring revenues and the ability to capture more value across the compute stack. SGA trimmed the position after strong share-price appreciation because of valuation considerations but continues to own the company.
“With strong pricing power, highly recurring revenues, and expanding royalty rates as Arm captures more value across the compute stack, we continue to view the company as a high-quality, long-term compounder well-positioned to benefit from the proliferation of AI and power efficient computing.”
Key risks
- Valuation following strong share-price performance
- Expected weakness in handset markets