Shares of Arm Holdings (ARM 6.00%) are moving higher today for two primary reasons. First, there was an upward trend in semiconductor stocks as several companies announced AI deals in the Middle East, assuaging concerns that "AI diffusion" rules won't be as strict as some had feared.

Additionally, a report from Citigroup said that Arm was taking market share from AMD and Intel in microprocessors.

As a result, the stock is up 4.2% as of 11:25 a.m. ET.

Image source: Getty Images.

Arm is gaining an edge

Nvidia is a major customer for Arm, so the news out of Saudi Arabia that Nvidia will sell hundreds of thousands of AI chips to the country should favor Arm as well. Both Nvidia and AMD announced deals to sell chips to Humain, an AI start-up formed by Saudi Arabia's sovereign wealth fund.

Additionally, Citi said that according to Mercury Research, Arm gained 281 basis points sequentially in microprocessor shipments in the first quarter, increasing its market share to 13.6%. Intel still dominates the market with 65.3% market share., which could create a further opportunity for Arm to gain market share.

Can Arm keep gaining?

Arm shares pulled back after it reported fourth-quarter earnings last week. While the results were solid, management's forecast for fiscal first-quarter profit was below the consensus, and it declined to give full-year guidance due to general macroeconomic uncertainty and a lack of clarity from its customers.

However, the news from Citigroup underscores a structural advantage that Arm has, which is that its chips are more power-efficient than the x86 design used by Intel and AMD, which is helping it gain market share in areas like data centers. Given the need to control energy usage in the data center, Arm looks like a good bet to continue gaining market share.