Arm Stock Slips As Court Room Battle With Qualcomm Kicks Off In Delaware: Retail Divided

Shares of Arm Holdings Plc. dropped over 2% and Qualcomm’s shares also edged lower in midday trade on Tuesday as the courtroom showdown between the two chipmakers unfolded in Delaware, keeping retail sentiment subdued.

The dispute, centered on Qualcomm's $1.4 billion acquisition of Nuvia in 2021, could have significant ramifications for the semiconductor industry.

According to Reuters, documents presented by Qualcomm’s legal team suggested that Arm had considered designing its own chips, while Arm CEO Rene Haas insisted the company has not pursued this path.

“We don’t build chips. We’ve never built chips,” he told jurors. The report highlighted that while Haas acknowledged exploring strategic options, he emphasized that Arm remains focused on licensing technology.

According to the report, Qualcomm’s legal team also argued that Arm misled its customers, including Samsung Electronics, by warning them about the potential destruction of Nuvia’s designs. 

Qualcomm contends these warnings could disrupt its chip supply chain, with broader implications for the industry.

Arm Holdings Plc. Sentiment and Message Volume on Dec 17 as of 2:50 p.m. ET | Source: Stocktwits

Retail sentiment around Arm remained in the ‘neutral’ zone as chatter remained at ‘high’ levels. 

Some investors on the ticker believe that the trial's outcome will likely favor Arm, while others are unsure and waiting to see how Tuesday’s deliberations play out. 

Qualcomm Sentiment and Message Volume on Dec 17 as of 3:00 p.m. ET | Source: Stocktwits

Meanwhile, retail sentiment around Qualcomm was also ‘neutral,’ albeit a marginal improvement over the previous day’s ‘bearish’ shadow, as chatter remained at ‘high’ levels.

Investors on Qualcomm’s ticker are also waiting for the trial to end but hope that Qualcomm will emerge victorious. 

The ongoing trial has implications for the broader chip industry, as Qualcomm is a key Arm customer and reportedly paying the company around $300 million annually in licensing fees, according to Bernstein analyst Stacy Rasgon.

On Monday, jurors reportedly reviewed internal documents revealing that Nuvia’s royalty rates were significantly higher than Qualcomm's existing rates. 

Arm alleged that allowing Qualcomm to pay the lower rates could undermine its business model, potentially costing the company $50 million annually.

Arm is expected to call its final witnesses on Tuesday, and Qualcomm may bring its CEO, Cristiano Amon, to testify. Jury deliberations could begin as early as Thursday.

Arm is seeking a court order to destroy Nuvia's designs, which are a key part of Qualcomm’s new low-powered AI PC chips.

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