Qualcomm Inc (NASDAQ:QCOM) gains significant leverage in future litigation after securing a critical legal win against Arm Holdings Plc (NASDAQ:ARM), according to JPMorgan analyst Samik Chatterjee.
What The Court Said: A Delaware District Court ruled that Qualcomm's acquisition of Nuvia did not violate Arm's Architecture License Agreement (ALA), securing the designs under Qualcomm's license.
While the verdict didn't resolve all questions about Nuvia's prior actions, it eliminates fears of canceled licenses or disruptive financial repercussions.
It also dismisses major uncertainties surrounding the license agreement with Arm and allows San Diego-based Qualcomm to continue selling and innovating on Arm's chips without interruption.
Still, Chatterjee warns of potential future litigation from Arm and hints at possible renegotiations over financial terms for ALA extensions beyond 2033. Qualcomm has the option to renew the license for an additional five years in 2028 for just $1 million annually—a move that could be pivotal for its long-term roadmap.
Beyond The Courtroom: Trial disclosures revealed Qualcomm's ambitious plans post-Nuvia acquisition, including four groundbreaking CPU design efforts:
Hamoa – Aimed at PCs and laptops.
Pakala – Targeting the smartphone market.
Nordschleife – Designed for automotive applications.
Pegasus – Focused on future computing and mobile innovations.
While these efforts showcase Qualcomm's R&D prowess, Arm's potential plans to develop its own processors — possibly for Samsung — add an intriguing layer of competition.
Bearish Signals Dominate
Despite the legal victory, Qualcomm's stock isn't getting much love from the technical indicators.
Chart created using Benzinga Pro
Trading at $152.89, QCOM stock lags below its eight-day, 20-day, 50-day, and 200-day simple moving averages—all flashing bearish signals.
The Moving Average Convergence Divergence (MACD) at a negative 2.73 and a Relative Strength Index (RSI) of 39.6 suggest QCOM stock is nearing oversold territory, but bears remain in control.
Chatterjee maintains an 'Overweight' rating for Qualcomm stock, citing its ability to navigate legal challenges and drive innovation.
However, the road ahead could see bumps if Arm chooses to escalate disputes or Qualcomm faces challenges in renegotiating license terms.
For Qualcomm investors, the court ruling removes a major overhang, clearing the way for further innovation in Arm-based chips.
Yet, with bearish technicals and lingering uncertainties about Arm's next moves, the stock remains a high-stakes play.
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