Chip stocks rallied on Wednesday. ARM Holdings up 15.7%; AMD up 6%; Navitas, SMCI up 5%; Intel, Marvell up 4%.

ARM Holdings stock popped over 10% after the company unveiled its ambitious plan to enter the market for data-center chips. But shares later reversed course and headed for their best day in nearly a year. What happened?

Arm on Tuesday revealed its first-ever data center CPU, developed in close collaboration with Meta Platforms and an ASIC design partner. The chip already has entered the customer sampling process, with production slated for later this year.

The company expects its new chip business to generate $15 billion in sales in five years, up from roughly $1 billion in fiscal 2028. At the same time, the IP business will continue to grow and record sales of $10 billion, Haas said.

Arm is targeting $25 billion in total sales within five years, or five times the level generated by its existing business, which centers on licensing intellectual property. Analysts expect the company to log about $4.9 billion in sales for its latest fiscal year, which ends this month.