Why Arm Holdings Stock Popped on Wednesday

Key Points

• The chipmaker has apparently won a new contract with a major client.

• Interestingly, it's also been locked in a tough legal dispute with that peer.

• 10 stocks we like better than Arm Holdings ›

On reports that it has secured a new deal with a major company in the chip sector, Arm Holdings (NASDAQ: ARM) saw a leap in share price Wednesday. The U.K.-based semiconductor specialist's equity increased to close the day over 6% higher, crushing the 0.3% gain of the S&P 500 (SNPINDEX: ^GSPC) that trading session.

Speculation about a new gig

Reuters published an article stating that leading mobile chip company Qualcomm has elected to use Arm's current technology in its products. Citing unidentified "sources familiar with the matter," the news agency said that Qualcomm's recently introduced PC and smartphone chips will be packed with the ninth version of Arm's tech.

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That report surely caught many Arm- and Qualcomm-watchers off guard, as just the day before, the two companies received the latest judgment in a long-running dispute over licensing brought by the former over Qualcomm's Snapdragon X chipsets. Judge Maryellen Noreika quashed Arm's request for a full retrial on the matter.

Arm has pledged to appeal the ruling; however, at the same time, it's clearly eager to continue doing business with Qualcomm, a client of long standing despite the legal tussle.

Numbers wanted

The Reuters article did not provide any numbers for the apparent deal, so even if the reporting is accurate, it's difficult to ascertain what it might mean for Arm's financials.

Also, at this point it's as-yet unconfirmed speculation, regardless investors are justifiably glad the specialty tech company might have earned this latest Qualcomm work. They're also surely relieved that the lawsuit has been resolved -- at least this stage of it.

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Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Qualcomm. The Motley Fool has a disclosure policy.