Arm Holdings: Riding the Wave of AI Stock Frenzy

The frenzy surrounding artificial intelligence (AI) stocks has sparked a surge in options trading activity for Arm Holdings, as investors rush to capitalize on the company’s soaring share prices. Arm Holdings experienced an astounding 80% surge in its stock value since Wednesday, driven by upbeat forecasts for quarterly results attributed to the burgeoning demand for its technology in designing AI-enabled chips.

This meteoric rise in Arm’s stock has triggered a flurry of options trading, with daily volume skyrocketing to approximately 490,000 contracts over the last three sessions. This surge in trading activity, which dwarfs the average daily volume of options in the month leading up to the earnings report, underscores the heightened investor interest in Arm Holdings as a potential leader in the AI chip market.

Chris Murphy, co-head of derivative strategy at Susquehanna Financial Group, observed that investors are actively seeking the “next NVIDIA,” referring to the chip heavyweight Nvidia, which has witnessed an impressive 220% increase in its stock value over the past year, making it the top-performing stock in the S&P 500. The bullish sentiment surrounding Arm Holdings is further fueled by the belief that it could emulate Nvidia’s success in capitalizing on the AI boom.

By mid-afternoon on Monday, a staggering 600,000 Arm contracts had changed hands, with the day’s volume projected to reach a record-breaking 816,000 contracts. Among the most actively traded Arm contracts were call options betting on the shares rising above $185 by the end of the week. Call options provide investors with the right to buy shares at a predetermined price in the future, indicating a bullish outlook on Arm’s stock performance.

The sharp increase in Arm’s share price has translated into substantial profits for bullish options traders. For instance, a trader who invested approximately $12.2 million in Arm January 2026 calls on February 7 witnessed the value of those contracts surge to approximately $42 million by Monday. Despite these significant gains, the trader’s decision to hold onto these call options signals continued optimism regarding Arm’s future performance, according to Murphy.

In addition to bullish bets, there was also notable activity in Arm puts, suggesting that some investors may be seeking to lock in profits from the recent rally in the stock price. Puts provide investors with the right to sell shares at a predetermined price, indicating a more cautious stance among certain market participants amidst the volatility in Arm Holdings’ stock.

It’s important to note that while Arm’s technology is not directly utilized in AI applications, companies like Nvidia are selecting Arm’s central processing units to complement their AI-specific chips. This strategic positioning underscores Arm’s importance in the AI ecosystem and reinforces investor confidence in its long-term growth prospects.

In conclusion, the surge in options trading activity for Arm Holdings reflects the heightened interest and speculation surrounding AI stocks in the market. As investors bet on the company’s potential to capitalize on the AI revolution, Arm’s impressive share price rally has generated substantial profits for bullish options traders, while also prompting some to hedge their positions amid market volatility.