Arm's Nasdaq debut on Thursday looks good for SoftBank, which just spun the company out after acquiring it in 2016. But it's a head-scratcher for Wall Street.
The UK-based chip design company saw its stock jump 25% to $63.59 after its IPO, lifting the company's fully diluted market cap to almost $68 billion.
That's a wildly high number for a semiconductor company that generated $400 million in profit in the past four quarters. It results in a price-to-earnings ratio over that stretch of close to 170, a number that towers over even Nvidia's P/E ratio.
Nvidia, which develops graphics processing units (GPUs) that are being used to run artificial intelligence workloads, trades for 109 times trailing earnings — and that's after the stock price more than tripled this year, far outpacing any other member of the S&P 500.
In the rest of the chip sector, nothing even comes close. The Invesco PHLX Semiconductor ETF, which is designed to measure the performance of the 30 biggest U.S. chip companies, has a P/E ratio of about 21.