The reason babies throw their arms up when they are sleeping is because of a natural involuntary reflex.
The babies throwing their arms up when asleep is an involuntary startle response called the Moro reflex and they can get startled in their sleep for just about anything.
The baby can then move their arms back to the normal position and then back again depending on if they got startled again.
I sometimes myself will throw my arms back when sleeping and some other adults do it as well even if they don't know about it.
Sometimes I'm just more comfortable with my arms in that position as well.
But babies are usually doing it because of the reflex that happens that they cannot control.