CNBC Investing Club: Market Rally Continues, Arm Holdings Surges 30%

Stocks are on track for a positive finish on Friday, lifting the S & P 500 into the green for the week and putting it on pace for a fourth consecutive weekly gain. Chip stocks are dominating the conversation once again after Intel's strong quarter and comments about the market for central processing units (CPUs). It Graphics processing units (GPUs) made by the likes of Nvidia are still crucial to the AI boom. But the rise of agentic AI is shifting the CPU-to-GPU balance in AI clusters toward a more even mix, according to Intel's CEO, something the market has underestimated. Intel and AMD are typically the first names investors think of when it comes to data center CPUs, but newest Club holding Arm Holdings also deserves a spot in that conversation. The company sells the "blueprints," or the designs for CPUs, and has more recently begun developing its own CPU product. We set a price target of $200 on Arm when we started this new position on Monday. Remarkably, it's rallied more than 30% since then, blowing past our target. We're taking that up to $250, but we are downgrading our rating to a 2. Of course, we're still optimistic on Arm's future, but it would be better to wait for weakness than buy more up here. The company's next earnings report on May 6 should be good based on everything we hear about CPUs, but the stock has gone parabolic, and it's in our discipline not to chase those kind of moves. By the way, rising demand for CPUs likely gives Amazon and Alphabet an added edge over other hyperscalers, thanks to their success developing in-house silicon. Amazon's offering is AWS Graviton, while Alphabet's is known as Google Axion . In more validation of Amazon's chip strategy, Meta said Friday its agreed to deploy at least tens of millions of Graviton cores. Both Graviton and Axion are Arm-based CPUs, meaning Arm collects a royalty on each chip deployed. Get ready for the busiest week of earnings season, with about one-third of the S & P 500 scheduled to report. Within the portfolio, we'll hear from 10 companies: Corning , Starbucks , Alphabet , Amazon , Meta Platforms , Microsoft , Cardinal Health , Eli Lilly , Apple , and Linde . Other big names scheduled to report are Merck , Caterpillar , Chevron , Coca-Cola , SanDisk , and both Visa and Mastercard . In between these reports, there is the Federal Reserve's policy meeting for April, which will be Jerome Powell's final one as Fed chair.