Arm and Qualcomm escalate competition in AI chip licensing and instruction-set architecture design, challenging Nvidia's accelerator dominance.

Arm Holdings (NASDAQ: ARM) is navigating an escalating legal battle with longtime customer Qualcomm Inc. (NASDAQ: QCOM) while expanding deeper into AI and data center chips, putting the company in increasingly direct competition with some of its traditional licensees.

On Monday, Arm and Qualcomm returned to U.S. federal court in Delaware over licensing, technology access, and Qualcomm's relationship with Meta Platforms Inc. (NASDAQ: META). Both stocks traded lower following the hearing.

Qualcomm accused Arm of withholding chip-testing tools required under their contract and leaking its 2024 threat to terminate a key license agreement. The company seeks to suspend royalty payments to Arm for up to five years—a remedy potentially worth billions of dollars—claiming the leak damaged discussions with Meta over a potential chip deal. Qualcomm attorney Karen Dunn cited internal documents showing Arm executives referring to Qualcomm as the "enemy" and worrying about declining royalty revenue.

Arm rejected the allegations, with attorney Gregg LoCascio arguing that Qualcomm failed to demonstrate actual damages. "They were not harmed in the least," LoCascio said. Arm also described Qualcomm's alleged lost chip deals as speculative. Judge Maryellen Noreika is considering whether Qualcomm can pursue the five-year royalty suspension, which could materially affect Arm if granted.

The dispute dates back to Arm's 2022 lawsuit against Qualcomm, with Qualcomm securing a key victory in 2024. Tensions intensified in March 2025 when Qualcomm filed complaints with regulators in the U.S., Europe, and South Korea, alleging that Arm's push into selling its own chips threatened competition and customer access. Arm increasingly competes with customers including Qualcomm and NVIDIA Corp. (NASDAQ: NVDA) for AI and data center business, including reported competition to supply Meta with CPUs.

Despite the legal tensions, Arm shares have gained close to 180% in 2026, supported by AI infrastructure demand, rising data center CPU adoption, and strong financial results. At the time of publication on Monday, Qualcomm shares were down 1.64% at $181.83 and ARM Holdings shares were down 2.11% at $301, according to Benzinga Pro data.