SoftBank's chip designer Arm Holdings is set to debut on the Nasdaq on Thursday, in what is expected to be the biggest test for the U.S. IPO market after a listing drought that lasted for nearly 16 months.

The company on Wednesday priced its offering of 95.5 million American Depositary shares at $51 apiece, fetching $4.87 billion for SoftBank at a valuation of $54.5 billion, with participation from cornerstone investors including Apple, Intel and Alphabet.

Arm will be back as a publicly traded firm after seven years. Its shares used to trade on the London Stock Exchange and the Nasdaq from 1998 until 2016 when it was taken private by SoftBank in a $32 billion deal.

Hopes of a revival in the IPO market largely depend on the success of the high-profile listings of Arm and other marquee startups, including grocery delivery firm Instacart and marketing firm Klaviyo.

Investors have over the last year begun to pay more attention to profitability, shunning cash-burning startups that had in 2021 fetched lofty valuations on the back of a record year for deals.

Arm has positioned itself as indispensable in the tech hardware ecosystem as its chip designs power nearly every smartphone in the world, from Apple's iPhones to Samsung's Android-based devices.

"Despite some concerns about the company's exposure to numerous risks in China, it's not stopped a juggernaut of enthusiasm, with the IPO oversubscribed multiple times," said Susannah Streeter, head of money and markets, Hargreaves Lansdown.

In the run-up to Arm's debut, chip stocks including Nvidia, Intel, Advanced Micro Devices, Broadcom, Qualcomm and Micron Technology were up between 0.6% and 1.2% in premarket trading.

Arm told potential investors in New York last Thursday that the cloud computing market, of which it has only a 10% share and therefore more room to expand, could grow at an annual rate of 17% through 2025, mainly due to advances in artificial intelligence.

The global automotive market, of which it commands 41%, is expected to expand by 16%, compared with just 6% growth for the mobile market.

Arm also told investors its royalty fees, which account for most of its revenue, were accumulating since it started collecting them in the early 1990s.

Royalty revenue came in at $1.68 billion at the latest fiscal year, up from $1.56 billion a year ago.

Barclays, Goldman Sachs, JPMorgan Chase and Mizuho Financial Group are the lead underwriters.

(Reporting by Manya Saini and Niket Nishant in Bengaluru; Editing by Arun Koyyur)