After Arm announced its performance, the stock price dropped, highlighting the high expectations threshold that AI companies face.

Optimistic performance was not enough to boost Arm Holdings' stock price on Wednesday, indicating that investors are scrutinizing artificial intelligence companies with a more critical eye in today's tech stock trading. The British chip design company reported third-quarter revenue of $1.24 billion, a 26% increase year-over-year, slightly higher than analysts' expectations of $1.23 billion. Adjusted earnings per share were 43 cents, higher than FactSet's average expectation of 41 cents. The midpoint of Arm's revenue forecast range for the first quarter is $1.47 billion, while FactSet's average expectation is $1.44 billion. However, investors may have been hoping for a larger exceedance, especially as people become more selective in AI trading. Prior to the financial report, BofA analyst Vivek Arya stated that there had been "undiscriminating" sell-offs of chip stocks recently. Arm's stock fell by 9% in after-hours trading on Wednesday.