TSMC Sells Arm $102 Million in Stake as Shares Soar amid AI Boom

BEIJING, February 22 (TMTPost)-- Taiwan Semiconductor Manufacturing Co. (TSMC) sold cashed out more than $100 million in stakes of Arm Holdings plc as the U.K. semiconductor designer benefited from ongoing artificial intelligence (AI) boom.

Credit：Arm

TSMC’s subsidiary TSMC Partners Ltd. has sold 85 million Arm shares at a price of $119.47 on Wednesday, according to a filling with the Taiwan Stock Exchange Corporation that day. The stake TSMC offloaded valued at $102 million, and the world’s biggest contract chipmaker gained $58 million through the transaction.

Following the sales, TSMC still owns some 1.12 million Arm shares, or an approximately 0.1% stake, which are worth of about US$138 million based on their closing price of US$123.39 Wednesday. This is TSMC’s first shares sales since it acquired Arm during the latter’s listing last year. Arm went on public on the Nasdaq under the ticker ARM on September 14. The company sold about 95.5 million shares and raised US$48.7 billion in the year’s largest initial public offering (IPO).

Arm’s architecture is used in nearly every smartphone chip and outlines how a central processor works at its most basic level. The IPO received warmly welcome as shares surged nearly 25% in their first trading day. Arm sold $735 million in shares to a group of strategic investors comprising Apple, Google, Nvidia, Samsung, AMD, Intel, Cadence, Synopsis and TSMC, which are also some of its biggest customers, Chief Financial Officer Jason Child said that day. “There was interest to buy more than what was indicated, but we wanted to make sure we had a diverse set of shareholders,” Child said. Prior to the Arm listing, TSMC said its board of directors had approved an investment in Arm of an amount no more than US$100 million based on its final share price at the IPO.

TSMC’s sales came on heels of Arm’s blistering rally over a blockbuster earnings earlier this month. Arm reported on February 7 that its revenue for the fiscal third quarter increased year-over-year (YoY) to US$824 millioin, way above Wall Street expected US$761 million. Earnings per share (EPS) of US$0.29 for the quarter ended December 2023 also beat expectation of US$0.25. Moreover, the chip design company issued a strong-than-expected guidance for the current quarter, highlighting how AI spending drove the sales. Arm projected EPS of between US$0.28 and US$0.32 cents on sales of US$850 million to US$900 million, topping analysts’ forecast of US$0.21 per share on sales of US$780 million. At the midpoint of its revenue range, Arm is looking for revenue growth this quarter of 38%, more than doubling a quarter earlier. Arm shares jumped more than 90% in three days following quarterly earnings. As of Wednesday, the day of TSMC’s sales, Arm stocks rallied more than 64% to the year date.

While Nvidia Corp., one of Arm and TSMC’s customers, has been the biggest beneficiary of AR-driven demand for computing power, Arm has joined in the AI party. TSMC said its sales intended to recover costs and it has no plan for further offload. However, It is notably that Arm rally is partly due to its small public float since SoftBank still holds 90% of the company after the listing. Arm shares are facing a real test when the IPO lockup period,which prohibits company insiders from selling the stock, expires on March 12. The end of lockup means the remaining 90.5% of shares become eligible to be traded. The small public float that helped drive Arm shares higher could also easily make any of SoftBank’s sales push the stock way down.