NASDAQ:ARM is Comically Undervalued

Sell-side has completely missed Nvidia Grace royalty mega ramp.

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ARM 0.00%↑ is on its way to the moon. Not our moon. Maybe one of Jupiter’s moons.

Background here as today’s update is an extension of this thesis:

[GB200 NVL72] The Mainframe of Doom

Nvidia reported today and spiked.

ARM (LTD), along with several other stocks, also moved after hours, riding the leather jacket party.

Here are my biases, updated based on after-hours prices:

ARM is now my highest conviction long-term investment idea. I plan to aggressively buy more and might even use margin to buy some LEAP calls.

THIS IS NOT INVESTMENT ADVICE. THIS IS HOW I PLAN TO SPEND MY* OWN MONEY (*borrowed or otherwise…). DO YOUR OWN RESEARCH.

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Source

There are two very important pieces of information in this Tweet.

1. Nvidia is re-doing the packaging for GB200 in order to meet demand, despite TSMC massively expanding CoWoS capacity.

2. Crazy expected shipment numbers for Grace CPUs due to very high GB200 mix within the Blackwell product family.

In isolation, the unit numbers don’t mean anything. Could be just another made-up number from the rumor-mill.

However, Nvidia going through the enormous effort to re-do all signal integrity and power integrity on a new packaging technology **mid generation** gives enormous credibility to the numbers and has massive implications for ARM (LTD).

Part 1: Packaging Speedrun

What Nvidia is working on right now.

The current version of GB200 that is ramping production.

Packaging is very complicated. I want to hammer home this point. Nvidia is not fast-tracking a fan-out (InFo) derivative of GB200 (CoWoS) for fun. The engineers working on this effort are in omega crunch mode right now.

Here is a picture of the CoWoS GB200 board. All of the stuff in the green circles represent power delivery components. The blocky things are inductors, commonly referred to as “chokes”. Flat rectangles are power-stages. Modern-high-end power stages are typically rated for 70-90 amps. Nvidia runs Vcore at ~1 volt +/- 100 mV. At first glance, it appears that each Blackwell (700W TDP) only needs ~15 power stages to have sufficient margin.

We have a lot more than 15 power stages. It is very common to run many power stages out of phase at much lower current to get better VRM (voltage regulator module) efficiency and cleaner ripple.

The stability of digital logic (the GPU itself) depends on how clean the input DC supply rails are. Enormous effort is needed to get this right.

All of the following need detailed power integrity (PI) design, simulation, and analysis:

• PCB

• Substrate (organic)

• RDL (organic)

• Interposer (silicon)

Then you have to deal with signal integrity (SI) of three separate high-speed, densely packed I/O… ON ALL PREVIOUSLY MENTIONED ITEMS.

• NVlink C2C (Blackwell package to Grace)

• NVlink D2D (Blackwell die to Blackwell die)

• NVlink (200G Ethernet-style SerDes)

Re-doing all of this work for Blackwell as a mid-generation derivative only makes sense if Nvidia expects massive demand that cannot and will not be met by CoWoS capacity.

Nvidia’s incredible packaging speedrun is a gigantic blaring signal that GB200 NVL36/72 integrated mainframe share within Blackwell generation will be incredible.

Part 2: ARM’s Rocket Ship

Here is my COGS model for Grace.

For base/bear/bull it is important to recognize that ARM (LTD) wants Nvidia Grace to have bad yields.

Bad yield —> Higher COGS —> Higher ASP because Nvidia has fixed target gross-margins.

Here is the infrastructure revenue ARM (LTD) could see JUST FROM GRACE!

There are plenty of other ARM-based CPU and DPU product lines ramping in datacenter right now.

Nvidia Grace could single-handedly shatter sell-side expectations for ARM (LTD)!

Arm To A Moon

453KB ∙ XLSX file

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Feel free to download and play with the ghetto spreadsheet using your own assumptions. :)