Is ARM A Buy After Record IPO? CEO Insights, Ongoing Lawsuit, And Financials

ARM Holdings PLC ARM made its market debut Thursday with the year's largest IPO, valued at $54.5 billion. The shares, priced at $51 each — at the top of the IPO range of $47-$52 — closed Thursday's trading session at $63.59.

The Cambridge, England-based tech company, known for producing the CPUs for Nvidia Corp’s NVDA AI-driven GPUs, was acquired by SoftBank Group Corp SFTBY in 2016 for $32 billion.

The Japanese conglomerate is holding onto 90% of its ownership, selling just 10% to investors in the IPO.

Related: Betting Big: SoftBank Consolidates ARM Ownership Before Mega $54.5B IPO

ARM CEO Rene Haas touched on the firm's trajectory and ongoing legal matters in an interview with CNBC.

When asked about ARM's potential venture into designing its own chips, Haas didn't disclose specific plans but highlighted the company's foundational role in the electronics sector, hinting at growth prospects.

Regarding the Qualcomm Inc QCOM lawsuit, Haas emphasized the mutual relationship between Arm and the company, pointing out that all Qualcomm products, from the Snapdragon chip in smartphones to automotive platforms, rely on ARM technology.

He said he hoped for a resolution but refrained from discussing the litigation due to its impending court date next year.

What’s going on with Qualcomm? The licensing disagreement between Arm and Qualcomm could potentially disrupt U.S. competitiveness in the semiconductor field. The issue primarily revolves around Arm's claim of a license and trademark breach by Qualcomm and Nuvia.

Contextually, Qualcomm's $1.4 billion acquisition of Nuvia in 2021 was seen as a step towards outclassing Apple Inc’s AAPL M Series processors in the PC realm, according to a June Bloomberg Law report. It was vital as Qualcomm, equipped with Nuvia technology, could counter Chinese competitors, especially in the backdrop of the chip shortage and rising national security concerns.

The legal contention comes from Arm's allegations that Qualcomm, post-acquiring Nuvia, improperly transferred license rights, intellectual property, and "confidential information" without consent.

The disagreement also covers royalty negotiations, which appear to be at the core of the standoff. The distinctions between the licenses — whether solely technology or architecture-based — further complicate matters.

The crux of the lawsuit has the potential to shape the future competitiveness of the U.S. semiconductor industry. If Nuvia's IP were to be invalidated, it might undermine efforts like the CHIPS Act of 2022, which aims to restore the advanced semiconductor manufacturing base in the U.S.

That could pose risks to both the industry's competitiveness and national security.

Financials at a Glance: ARM's revenue for fiscal 2023 slightly decreased to $2.679 billion from $2.703 billion. Net income showed a decrease from fiscal 2022's $549 million to $524 million in 2023.

ARM Price action: Shares of Arm closed 25% higher at $63.59 on Thursday, according to data from Benzinga Pro.

Read next: Rene Haas Shines Light On Arm's Dominance Amid 2023's Biggest IPO

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