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Qualcomm (QCOM) to Benefit From $1.4B NUVIA Buyout, Shares Up

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Qualcomm Incorporated (QCOM - Free Report) recently announced its intent to acquire a chip startup — NUVIA — to address the burgeoning requirements of next-gen 5G computing in the dynamic tech industry. The deal is valued approximately at a whopping $1.4 billion (excluding working capital and other adjustments), and is expected to elevate Qualcomm’s position in the 5G chipset market driven by NUVIA’s expertise in high performance processors for compute-intensive applications and devices.

NUVIA specializes in next-gen custom CPUs based on the ARM architecture. Consequently, the acquisition will enable Qualcomm to leverage and incorporate the same in its AI engine, multimedia accelerators and mobile graphics processing unit. This is expected to enhance its power efficiency with a superior chip performance.

Moreover, the incorporation will help in bolstering Qualcomm’s prominent Snapdragon platforms and deliver significant enhancements in CPU performance. Following the news, shares of the San Diego, CA-based telco equipment maker inched up 1.9% to close the trading session at $157.42 as of Jan 13.

Instituted in 2019, the silicon design startup company, NUVIA, is the brainchild of three Apple Inc. AAPL engineers. This two-year old company primarily caters to U.S.-based clients and focuses on creating complex Systems on a Chip and high-performance computing platforms that pave the path for advanced technological innovations across multiple industries.

Currently, Qualcomm depends directly on ARM, a leading technology provider of processor IP, to license its computing cores whereas NUVIA utilizes ARM’s underlying architecture for custom core designs. As a result, the transaction is likely to not only cut down Qualcomm’s licensing costs but also minimize its dependency on ARM for more custom core designs in the long run. Reportedly, Qualcomm had witnessed about 70% growth in its stock in 2020 as a result of high demand for 5G smartphones.

As part of this deal, the second-largest semiconductor manufacturer will include NUVIA CPUs in the mobile processors for its Advanced Driver Assistance Systems, flagship smartphones, laptops, infotainment systems and infrastructure networking solutions, to name a few. This is expected to, very soon, unite mobile and computing architectures while empowering new-age customers with rich applications in the 5G-backed networking market.

Interestingly, Qualcomm and Apple, which have been at loggerheads, owing to the patent licensing practices of the former for quite some time have surprisingly resolved all their disputes. This, apparently, implies that both the companies can resume its joint business practices in the long run and challenge the monopoly of other tech giants like Advanced Micro Devices, Inc. AMD and Intel Corporation INTC.

In fact, strong support from industry leaders like Google, Samsung, Microsoft, General Motors, OnePlus and Lenovo, inoculate optimistic approach among investors who are eagerly waiting to reap considerable benefits from the much-awaited transaction. All these driving factors make it all the more desirable among smartphone manufacturers to deliver high-performance Snapdragon mobile platforms to the global market and push the boundaries for 5G acceleration.

Backed by such indigenous products and technology collaborations, the San Diego, CA-based wireless technology company is focused on helping customers experience seamless transition to superfast 5G networks with low-power resilient multi-gigabit connectivity. As one of the prime manufacturers of cutting-edge wireless chipsets, the company is focused on retaining its leadership in 5G with several technological accomplishments.

Qualcomm has a long-term earnings growth expectation of 19.6%. Shares of this Zacks Rank #2 (Buy) company have soared 75.5% compared with the industry’s growth of 40.6% in the past year. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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