Jim Cramer’s Game Plan for This Week: 8 Stocks in Focus

6. Arm Holdings plc (NASDAQ:ARM)

Number of Hedge Fund Holders: 38

Discussing the dispute between Arm Holdings plc (NASDAQ:ARM) and Qualcomm, Cramer said:

“There’s a ton of just regular corporate news next week. On Monday, for instance, a trial begins, people aren’t talking about it but I will, in a Delaware federal court between Qualcomm and Arm Holdings. It’s a patent dispute involving high-performance processors and if Arm wins, it’ll take away Qualcomm’s license to use important chips and cell phones and laptops. Now, the smart money is betting on a settlement, which I think would be good for everyone.”

Arm (NASDAQ:ARM) is a key player in the semiconductor industry, specializing in designing and licensing CPU products and related technologies. While it doesn’t manufacture chips, its designs are used by semiconductor companies and manufacturers. The company generates revenue by licensing its CPU architectures and collecting royalties on products that incorporate its designs.

In 2022, the company filed a lawsuit against Qualcomm after Qualcomm acquired Nuvia. The dispute arose from Qualcomm’s failure to negotiate a new licensing agreement, affecting its chip designs. Arm alleges that technology for Microsoft’s Copilot+ laptops is based on Nuvia’s chip architecture, further escalating tensions.

Additionally, Arm (NASDAQ:ARM) plans to cancel Qualcomm’s architectural license, which allows Qualcomm to use Arm’s intellectual property in its chip designs. This cancellation, with a 60-day notice given in October, could significantly disrupt Qualcomm’s operations, particularly its chip division, a major revenue driver. A Qualcomm spokesperson criticized Arm’s actions as baseless threats meant to pressure Qualcomm, undermine its CPU performance, and raise royalty rates.

As the trial approaches in December, Qualcomm argues that Arm’s attempt to terminate the agreement is unjustified and seeks to disrupt the legal process. Qualcomm is confident its rights will be upheld and criticized Arm’s anticompetitive actions.