Arm stock fell while Qualcomm stock rose on Monday in response to a jury verdict in a federal-court case over a technology licensing dispute.
Late Friday, a jury in the U.S. District Court for the District of Delaware ruled that Qualcomm had a valid license to use Arm's chip architecture for central processors it developed with the acquisition of a startup called Nuvia in 2021.
Arm argued that Qualcomm should have negotiated a new contract with it after the acquisition of Nuvia. It believed Qualcomm had breached the terms of its technology license agreement with Arm.
The court ruling clears the way for Qualcomm to continue selling chips used in a personal computers, including Microsoft Surface laptops. Those chips are an effort by Qualcomm to diversify its business from primarily smartphones.
"Overall it is hard not to view this turn of events as a clear victory for Qualcomm," Bernstein analyst Stacy Rasgon said in a client note Monday.
He added, "As for Arm, their guidance did not include any assumed upside from a win in this suit, and we think they will still benefit from any success of Qualcomm's Nuvia-inspired products — albeit likely less than if they had prevailed."
Rasgon reiterated his outperform rating on Qualcomm stock with a price target of 215. He rates Arm stock as underperform with a price target of 100.
Arm Stock Drops After Verdict
On the stock market today, Arm stock dropped 4% to close at 126.87. Meanwhile, Qualcomm stock rose 3.5% to 158.24.
Elsewhere on Wall Street, JPMorgan analyst Samik Chatterjee reiterated his overweight, or buy, rating on Qualcomm stock with a price target of 200 after the jury verdict.
The verdict "puts to bed a lot of uncertainty in the mind of investors relative to financial implications of an unfavorable judgment and potentially any effect from cancellation of a license as it handed Qualcomm a significant leverage for any future litigation," Chatterjee said in a client note.
Arm stock ranks No. 11 out of 39 stocks in IBD's fabless semiconductor industry group, according to IBD Stock Checkup. Qualcomm stock ranks No. 12 in the group.
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