QCOM Gains Overnight After Patent Deal With China’s Huawei Covering AI Chip Tech

• Qualcomm is licensing Huawei’s patents covering its LogicFolding chip technology.
• Huawei expects the overall value of its patent licensing agreements to exceed $6.9 billion following the Qualcomm deal, according to Bloomberg.
• QCOM shares have gained about 20% since the company’s latest earnings report, with recent catalysts including its Amazon chip deal and an extended patent agreement with Apple.

Qualcomm, Inc. (QCOM) shares rose about 2% overnight ahead of Monday after the chipmaker agreed to license patents underpinning Huawei Technologies’ LogicFolding chipmaking technique, giving the Chinese company a boost as it looks to advance its semiconductor technology and compete in AI.

The multiyear agreement is part of a broader cross-license deal between Qualcomm and Huawei covering technologies related to 5G devices, AI services, near- and co-packaged optics and networking, Bloomberg reported.

The financial terms were not disclosed. The deal is also subject to U.S. Federal Trade Commission review.

Why Huawei’s LogicFolding Technology Matters

Huawei unveiled LogicFolding in May, generating significant attention. LogicFolding is Huawei’s chip-design technology that rearranges and vertically “folds” circuitry to shorten signal paths, boosting chip performance without relying solely on more advanced manufacturing nodes.

The technique is said to improve data transmission speeds, performance and efficiency. That is particularly important for Huawei because China has limited access to ASML Holding’s extreme ultraviolet lithography machines, which are used to manufacture the most advanced chips, as well as Nvidia Corp.’s advanced AI chips.

Huawei has positioned LogicFolding as a potential way to narrow the performance gap with leading chipmakers such as Taiwan Semiconductor Manufacturing Co. (TSMC), while working around limitations imposed by U.S. export controls.

Huawei expects the overall value of its patent licensing agreements to exceed $6.9 billion following the Qualcomm deal, according to a company spokesperson cited by Bloomberg.

Qualcomm Deal Adds Validation

The Qualcomm agreement gives Huawei’s technology an important vote of confidence from a major global chipmaker, according to Bloomberg. Huawei is increasingly relying on domestically designed and manufactured semiconductors as U.S. restrictions have cut off its access to advanced foreign chip technology.

The company is also seeking to reduce China’s dependence on Nvidia. Huawei has long been one of the world’s largest patent developers, particularly in wireless technology, and has increasingly sought to monetize that intellectual property through licensing agreements with foreign companies.

QCOM Stock: Retail View, Recent Catalysts

On Stocktwits, the retail sentiment for QCOM dipped over the last week and was ‘bearish’ on Monday. 

Qualcomm stock has risen about 20% since its recent earnings report in late July, and a major chip sale-cum-investment deal with Amazon was announced early last month. On Sept. 24, Qualcomm said that Apple extended its patent-licensing agreement with ‌the chip designer, even as the iPhone maker looks to cut its reliance on the company's modem chips.

QCOM shares are up 9.8% year to date.

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