Arm Holdings (ARM) shares close lower on Wednesday as ARK Invest Founder Cathie Wood notably avoided the chipmaker's IPO, stating there's "too much emphasis on AI." Instacart (CART) stock falls by over 10% to close out its first full trading day. Lastly, RBC analysts initiate coverage on IBM, rating it at "Outperform" with a price target of $188.
Yahoo Finance Live's Akiko Fujita and Josh Lipton highlight some of the top trending stocks after Wednesday's closing bell at the New York Stock Exchange.
For more expert insight and the latest market action, click here to watch this full episode of Yahoo Finance Live.
JOSH LIPTON: Shares of Arm closed in the day in the red. Says their tough times are persisting as Cathie Wood is advising to stay away from the stock. That's amid too much emphasis on artificial intelligence.
So this one is an interesting name, Akiko. So Arm, obviously there were some questions about that. Skeptics didn't like the valuation. They didn't like the headwinds to growth, right? Obviously we think of Arm, we think of the smartphone market, which is slowing.
On AI, it's interesting because I was talking to tech analyst Patrick Moorhead. I know you know Patrick. Here's how he would put it. He would say Arm is a secondary player in AI. He says, listen, they're not-- they're not Nvidia, which, of course, poster child of the AI boom. But he did point out that Nvidia with its new superchip for the data center, the GH100, does have-- that is a combination, he said of Nvidia's GPUs and Arm CPUs. His point is they are a player but maybe not enough of a player for Cathie Wood, apparently.
AKIKO FUJITO: And that goes to kind of why we have seen Arm now in its fourth straight day of declines. The initial pop we saw on the expectation that they are going to be a player in the game, but since then we've seen analysts initiate coverage with some skepticism. Cathie Wood the latest to join in, but it really does point to what we have heard from Needham as well as Bernstein saying, look, it's not that we don't believe the AI story. We just haven't seen it, and we don't know how significant a revenue driver it's going to be moving forward.
Instacart also following Arm in the postdebut struggles, closing its first full trading day in the red. I mean, certainly too early to say where Instacart is likely to land in terms of where the company is. But, you know, part of this, Josh, is also trying to figure out where the competition is for the company. The company has talked a lot about sort of the ads now really driving revenue, but Instacart is still being seen as this grocery-delivery company. What are these additional tentacles they have to drive revenue beyond their core business?
JOSH LIPTON: And Instacart itself says-- I mean, that's a great point because they themselves say, listen you've got a lot of competition. Potentially they called out everybody from Walmart to DoorDash to Uber, so there is a lot of it.
AKIKO FUJITO: Yeah. Let's move on to our next stock that we're watching. Shares of IBM higher today after RBC Capital Markets initiated coverage on the stock Wednesday with an outperform rating and a price target of $188 a share. Analyst Matthew Swanson optimistic on the competitive positioning and unique role that IBM plays in the tech ecosystem.
You know, I was looking up this note, Josh, but really, in some ways, this is kind of an outlier, right? 28% of analysts still have a buy rating, but 67% have--
JOSH LIPTON: On the sidelines.
AKIKO FUJITO: --a hold.
JOSH LIPTON: No love for Big Blue.
AKIKO FUJITO: No love for Big Blue, but RBC saying, look, there's a bit of a misunderstanding of what exactly their software business is, and that's why it's largely undervalued.
JOSH LIPTON: Yeah. I mean, listen, IBM has not done much this year, right? It's up single digits. But if you're a bull, you say great. It's underappreciated. And listen, there are bulls who like-- they look at hybrid. They look at AI. They look at consulting, and they're fans.
AKIKO FUJITO: Yeah, I mean, the stock getting a lift, at least on one day here, on the back of RBC's initiation. $188 a share, which implies 28% upside to where we saw it close on Tuesday.
JOSH LIPTON: Yep.