Jim Cramer on the Dispute Between Arm Holdings plc (ARM) and Qualcomm: ‘Now, The Smart Money Is Betting On A Settlement, Which I Think Would Be Good For Everyone’
We recently compiled a list of the Jim Cramer's Game Plan for This Week: 8 Stocks in Focus.In this article, we are going to take a look at where Arm Holdings plc (NASDAQ:ARM) stands against the other stocks featured in Jim Cramer's game plan.
Jim Cramer, host of Mad Money, provided insights on Friday about this week's Federal Reserve meeting, key earnings reports, and the retail sales numbers due to be released. According to Cramer, the market is in a holding pattern at the moment, with investors growing increasingly uneasy. "When the market bides its time, guess what, people tend to get a little nervous," he remarked.
“I think the Wall Street's gotten a little too negative frankly, as we get oversold and we're getting there. But I've been warning about stocks going to excessive levels for two weeks now, so I can't be all that positive until we see a couple days where bond yields actually go lower with the stock market.”
Cramer pointed out that retail sales figures will be released on Tuesday, and although they are coming out just before the Fed's meeting, they will likely stir significant debate. This is especially true given the unusual timing of Black Friday this year, with a compressed shopping period between Thanksgiving and Christmas. He speculated that the bond market had a rough week, and if retail sales come in cooler than expected, it could provide a much-needed counterbalance, perhaps offering a potential buying opportunity after the Fed meeting.
Looking ahead to Wednesday, Cramer noted that the Federal Open Market Committee is widely expected to cut interest rates by 25 basis points. While he cautioned that nothing is certain, he emphasized that numerous Fed officials have indicated that a rate reduction is likely. He added:
“Every little signal from the Federal Reserve brings out predictions causing many people to sell good stocks when they are freaked out. You also have people who just can't let it go, dogs with bones. As soon as we get the Fed rate cut, well, guess what? They're immediately focused on the next cut. I think this is absurd.”
Cramer clarified that while he does see the Fed as important, he believes investors should not get bogged down by every minor shift in central bank policy. He reminded viewers that the Fed operates based on data, not ideology. He acknowledged that there could be dissent within the Federal Open Market Committee, but he cautioned against making investment decisions solely based on what the Fed might do next.
“Contrary to popular belief, there's more to investing than monetary policy and I wish everyone knew that. They don't.”
Moving on to Friday, Cramer highlighted that the personal consumption expenditures (PCE) inflation data would be released, offering the first look at the latest inflation numbers.
“Finally, on Friday, we get our first look at the next set of inflation data, that's called the personal consumption expenditures number. Remember, my view is that we'll continue to get endless chatter about what the Fed might do or not. So if this number runs hot, you're gonna hear a lot of doomsaying, and why do I put it up there then? Well, because maybe it's a good opportunity to buy something on weakness because other people will be freaked out by what the doomsayers say.”
In summary, Cramer believes we’re entering a seasonally strong period for stocks, though recent performance in some sectors has been underwhelming. He noted that while the Santa Claus rally typically provides a boost toward the end of the year, it’s important to wait for the Fed’s meeting to pass before making any significant moves.
Our Methodology
For this article, we compiled a list of 8 stocks that were discussed by Jim Cramer during the recent episode of Mad Money on December 13. We listed the stocks in ascending order of their hedge fund sentiment as of the third quarter, which was taken from Insider Monkey’s database of 900 hedge funds.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
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High angle view of a semiconductor chip against an array of electronics components.
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.
Overall ARM ranks 6th on our list of the stocks featured in Jim Cramer's game plan. While we acknowledge the potential of ARM as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than ARM but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
