Arm, Qualcomm Face Off In Court: What To Expect From Silicon Soap Opera
Written by Emily J. Thompson, Senior Investment Analyst
Updated: Dec 16 2024
0mins
Should l Buy ARM?
Source: Benzinga
Legal Dispute Overview: Arm Holdings is in a legal battle with Qualcomm over intellectual property rights related to Qualcomm's acquisition of NUVIA, which includes licensing agreements that Arm claims need renegotiation.
Industry Impact and Predictions: The outcome of the case could significantly affect the tech industry, as both companies are expected to settle, potentially resulting in Qualcomm paying more for access to Arm's technology.
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Analyst Views on ARM
Wall Street analysts forecast ARM stock price to rise
24 Analyst Rating
19 Buy
4 Hold
1 Sell
Strong Buy
Current: 122.190
Low
120.00
Averages
160.58
High
201.00
Current: 122.190
Low
120.00
Averages
160.58
High
201.00
About ARM
Arm Holdings plc is engaged in operating a global computing platform. It architects, develops, and licenses high-performance and energy-efficient Arm compute platforms. The Company’s principal operations and activities are the licensing, marketing, research and development of central processing unit (CPU) design intellectual property (IP), graphics processors, system IP, market optimized platform IP, and associated software, tools and other related services. Its complementary products include GPU and NPU accelerators, interconnect, and others. Its primary product offerings are CPU products that address diverse performance, power, and cost requirements. It offers a family of GPU and NPU products providing efficient computing acceleration and an optimal visual experience across a wide range of devices. Its CPU, GPU, and System IP products integrated into a foundational compute platform optimized for a specific end market.
About the author
Emily J. Thompson
Emily J. Thompson, a Chartered Financial Analyst (CFA) with 12 years in investment research, graduated with honors from the Wharton School. Specializing in industrial and technology stocks, she provides in-depth analysis for Intellectia’s earnings and market brief reports.
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- AI Market Volatility: Recently, AI stocks like Microsoft have dropped over 20%, reflecting a broader skepticism about the returns on investments made by large tech companies in AI, which has shaken investor confidence.
- Unique Business Model: Unlike Intel and Nvidia, Arm generates most of its revenue from licensing fees and royalties, with over half of its revenue coming from royalties recently, setting a solid foundation for future income growth.
- Deepening Client Relationships: Companies like Amazon, Google, and Apple are increasingly relying on Arm's designs, particularly with Amazon's Graviton 5 processor, which is expected to significantly boost Arm's royalty revenue in the coming years.
- Future Growth Expectations: While analysts project only a 7% revenue growth for fiscal 2026, they anticipate a more than 23% revenue increase in the following year, indicating Arm's potential for recovery in the AI market.
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- Inflation Data Impact: The US January CPI rose 2.4% year-over-year, below the expected 2.5%, which may prompt the Fed to continue cutting rates, with the 10-year T-note yield falling to 4.05%, providing support for the market.
- Earnings Performance: Over two-thirds of S&P 500 companies have reported earnings, with 76% exceeding expectations, and Q4 earnings growth is projected at 8.4%, demonstrating corporate resilience and restoring market confidence.
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- Core Investment Strategy: With approximately $40 billion invested in OpenAI, SoftBank showcases its strong confidence in the future of AI technology, indicating a strategic intent to position itself at the forefront of this rapidly evolving field.
- Diversified Portfolio: Beyond OpenAI, SoftBank's investments span various sectors, including chip designer Arm, robotics, and driverless cars, further enhancing its influence within the technology industry and showcasing its commitment to innovation.
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- Vision Fund Performance: SoftBank's Vision Fund reported a $2.4 billion gain in the December quarter, primarily driven by the increased value of its OpenAI investment, effectively offsetting losses from other ventures and demonstrating the success of its strategic focus on AI.
- Core Investment Strategy: With approximately $40 billion invested in OpenAI, SoftBank aims to position itself at the forefront of AI technology development, reflecting its strong confidence and long-term commitment to the burgeoning AI market.
- Diversified Investment Approach: In addition to OpenAI, SoftBank's investments extend to chip designer Arm and various sectors including robotics and autonomous vehicles, showcasing its broad positioning and foresight within the tech industry.
- Stock Price Surge: Following strong results from its telecommunications unit and a rally in Arm's stock price, SoftBank's shares have surged this week, indicating positive market sentiment and confidence in its investment portfolio.
See More
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- Rising Bond Yields: Following the robust payroll report, the 10-year Treasury yield rose by 4 basis points to 4.18%, with market expectations for a Fed rate cut next month dropping from 23% to 6%, reflecting investor caution regarding future monetary policy.
- Mixed Corporate Earnings: Vertiv Holdings saw its stock rise over 23% after forecasting full-year net sales of $13.25 billion to $13.75 billion, significantly above consensus, while Mattel's stock fell over 27% due to weaker-than-expected 2026 adjusted EPS forecasts, highlighting market reactions to varying corporate performances.
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- Steady License Revenue Growth: License revenue rose 25% year-over-year to $505 million, bolstered by a $200 million contribution from its agreement with Softbank, highlighting Arm's strong performance in the high-end market and enhancing its competitive position in the semiconductor industry.
- Smartphone Market Risks: While Arm anticipates a potential 15% reduction in smartphone sales due to memory supply constraints, the impact on its smartphone royalty revenue is projected to be only 2% to 4%, indicating the company's resilience in diversifying its revenue streams.
- Optimistic Future Outlook: Arm forecasts Q4 revenue to reach $1.47 billion, an 18% year-over-year increase, with projected growth in royalty and licensing revenues in the low to high teens, demonstrating the company's ongoing growth potential in the data center space.
See More
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- AI Market Volatility: Recently, AI stocks like Microsoft have dropped over 20%, reflecting a broader skepticism about the returns on investments made by large tech companies in AI, which has shaken investor confidence.
- Unique Business Model: Unlike Intel and Nvidia, Arm generates most of its revenue from licensing fees and royalties, with over half of its revenue coming from royalties recently, setting a solid foundation for future income growth.
- Deepening Client Relationships: Companies like Amazon, Google, and Apple are increasingly relying on Arm's designs, particularly with Amazon's Graviton 5 processor, which is expected to significantly boost Arm's royalty revenue in the coming years.
- Future Growth Expectations: While analysts project only a 7% revenue growth for fiscal 2026, they anticipate a more than 23% revenue increase in the following year, indicating Arm's potential for recovery in the AI market.
See More
US Stocks Edge Up, Led by Chipmakers' Gains
- Chipmaker Rebound: Applied Materials (AMAT) reported Q1 adjusted EPS of $2.38, surpassing the consensus of $2.21, leading to a 10% stock price increase that helped lift the broader market, indicating strong recovery potential in tech stocks.
- Inflation Data Impact: The US January CPI rose 2.4% year-over-year, below the expected 2.5%, which may prompt the Fed to continue cutting rates, with the 10-year T-note yield falling to 4.05%, providing support for the market.
- Earnings Performance: Over two-thirds of S&P 500 companies have reported earnings, with 76% exceeding expectations, and Q4 earnings growth is projected at 8.4%, demonstrating corporate resilience and restoring market confidence.
- Market Sentiment Fluctuations: Despite the overall market rise, concerns over AI persist, putting pressure on certain stocks, particularly in tech and logistics, reflecting investor caution regarding future economic prospects.
See More
SoftBank's Vision Fund Gains $2.4 Billion from AI Investments
- Significant Returns: SoftBank's Vision Fund reported a $2.4 billion gain in the December quarter, primarily driven by the appreciation of its OpenAI investment, effectively offsetting losses from other ventures and demonstrating its strategic foresight in the AI sector.
- Core Investment Strategy: With approximately $40 billion invested in OpenAI, SoftBank showcases its strong confidence in the future of AI technology, indicating a strategic intent to position itself at the forefront of this rapidly evolving field.
- Diversified Portfolio: Beyond OpenAI, SoftBank's investments span various sectors, including chip designer Arm, robotics, and driverless cars, further enhancing its influence within the technology industry and showcasing its commitment to innovation.
- Stock Price Surge: Following robust results from its telecommunications unit and a rally in Arm's stock price, SoftBank's shares have surged this week, reflecting market optimism regarding its investment strategy and recognition of its growth potential.
See More
SoftBank's Vision Fund Posts $2.4 Billion Gain Amid AI Investments
- Vision Fund Performance: SoftBank's Vision Fund reported a $2.4 billion gain in the December quarter, primarily driven by the increased value of its OpenAI investment, effectively offsetting losses from other ventures and demonstrating the success of its strategic focus on AI.
- Core Investment Strategy: With approximately $40 billion invested in OpenAI, SoftBank aims to position itself at the forefront of AI technology development, reflecting its strong confidence and long-term commitment to the burgeoning AI market.
- Diversified Investment Approach: In addition to OpenAI, SoftBank's investments extend to chip designer Arm and various sectors including robotics and autonomous vehicles, showcasing its broad positioning and foresight within the tech industry.
- Stock Price Surge: Following strong results from its telecommunications unit and a rally in Arm's stock price, SoftBank's shares have surged this week, indicating positive market sentiment and confidence in its investment portfolio.
See More
US Stock Market Volatility Driven by Nonfarm Payroll Data
- Strong Nonfarm Payroll Data: The US added 130,000 jobs in January, exceeding expectations of 65,000, while the unemployment rate unexpectedly fell by 0.1% to 4.3%, indicating a stable labor market that could influence Fed rate decisions.
- Rising Bond Yields: Following the robust payroll report, the 10-year Treasury yield rose by 4 basis points to 4.18%, with market expectations for a Fed rate cut next month dropping from 23% to 6%, reflecting investor caution regarding future monetary policy.
- Mixed Corporate Earnings: Vertiv Holdings saw its stock rise over 23% after forecasting full-year net sales of $13.25 billion to $13.75 billion, significantly above consensus, while Mattel's stock fell over 27% due to weaker-than-expected 2026 adjusted EPS forecasts, highlighting market reactions to varying corporate performances.
- Market Focus on Economic Data: This week, the market will focus on corporate earnings and economic indicators, with initial jobless claims expected to drop by 7,000 to 224,000, and January CPI projected to rise by 2.5% year-over-year, which will further influence investor decisions.
See More
Arm Holdings Shares Rise on AI Demand Boost
- AI Demand Drives Growth: Arm Holdings reported a 26% year-over-year revenue increase to $1.24 billion in Q3, primarily fueled by surging AI demand, with expectations that its data center business will become the largest segment, achieving a 50% market share.
- Steady License Revenue Growth: License revenue rose 25% year-over-year to $505 million, bolstered by a $200 million contribution from its agreement with Softbank, highlighting Arm's strong performance in the high-end market and enhancing its competitive position in the semiconductor industry.
- Smartphone Market Risks: While Arm anticipates a potential 15% reduction in smartphone sales due to memory supply constraints, the impact on its smartphone royalty revenue is projected to be only 2% to 4%, indicating the company's resilience in diversifying its revenue streams.
- Optimistic Future Outlook: Arm forecasts Q4 revenue to reach $1.47 billion, an 18% year-over-year increase, with projected growth in royalty and licensing revenues in the low to high teens, demonstrating the company's ongoing growth potential in the data center space.
See More
