Arm Holdings shares fell 8% after disappointing quarterly forecasts, as the company plans to invest in building its own chips. Arm’s move to develop chips marks a shift from supplying intellectual property. The decision may not result in a product and could eat into profits, costing upwards of $500 million.

Arm’s forecasted profit is slightly below estimates due to global trade tensions affecting smartphone demand. The company is recruiting staff to develop chiplets and complete processors. Details of discussions about making chips emerged during a trial in December, potentially putting Arm in direct competition with customers like Nvidia.

Arm, owned by SoftBank Group, seeks to boost revenue through new products like CSS tech. Uncertainty from global trade tensions and Trump’s tariff policies affect manufacturers and suppliers. Arm’s shares have surged but its forecast is below expectations. Smartphone royalties remain soft, but cloud and AI design wins drive royalty revenue.

Read more at Yahoo Finance: Arm shares drop as outlook disappoints; company looks to invest to make own chips