Member Info for BlueRaphus

I sent a secure message last week to HL to prompt them to provide us with the election options which might be why you received your message just recently.

They probably would have sent out the message at some point but I was conscious of the time left.

I decided ages ago to take the Qualcomm shares. Once I have them I'll start to think about whether I keep them all, sell some, or sell all.

Qualcomm as a stock is undervalued trading at a P/E significantly lower than many of its peers and with a DCF fair value some 20% below its current price, so arguably there's a good chance to see further growth as well as quarterly dividends. It will still see some volatility, but not as much as we had with AWE. Worth bearing in mind that a general market downturn is overdue and if so you can expect a fair drop but Qualcomm's fundamentals seem pretty robust to see it recover well from any severe downturn in the markets.

Hi NigeCo,

I've not been able to read this article as I don't pay for a Seeking Alpha subscription. I do agree with the sentiment of the title though!

Even from the point of view of its soon to be completed (6 months or so) acquisition of Alphawave, this will unlock some significant opportunities for Qualcomm to expand into the datacentre market, as well as being able to utilise Alphawave's IP in its other sector markets. Qualcomm now has an opportunity to become a significant player in the datacentre and other AI related markets. It will take time though.

I sold all my Alphawave holding at £1.85 and then bought back in again with same number of shares. Like you, I will be holding and very likely taking the share swap option. While I don't think Qualcomm is poised for any rapid growth, they should, if they execute well, grow steadily in price over the next decade plus I expect their dividend payments to stregthen over time too. So in my opinion it suits me as a core holding while I look to invest smaller portions in relatively secure undervalued high growth potential stocks. Hard to find but they do exist.

Jiang,

I see that you have found my Substack! Please accept my apologies that I haven't posted anything yet. I am working on it and will make some posts eventually. Just bear with me a little longer.

AWAVE,

I will attempt very briefly to answer your questions:

1> When Alphawave agreed to acquire of opensilicon in 2022, why market did not took positively , same during Banias labs in Oct-2022.

Making acquisitions comes with risks and institutional investors particularly on the London markets are quite risk aversed. That is main reason the stock didn't attract too much attention, even despite the fact that Alphawave do appear to have consolidated the acquisitions reasonably well. OpenFive came with legacy contracts that didn't fit in with Alphawave's aims and weighed down the revenue prospects somewhat.

2> when chatgpt 3 goes viral early 2023, market also not took it exuberantly? (Before Daniel fiasco)

Alphawave's focus on high-end high performance interconnects while ideal for AI takes time to develop, qualify and deliver to datacentres. Again Alphawave was seen as higher risk due to it being in the process of acquisition consolidation and being forced to find a way to exit its WiseWave Joint Venture will also have weighed down on the stock.

3> When stocks like credo/Astera labs were popping up in 2024, stock price of Alphawave was still waiting to go up (high was some where 162 during mid 20224)

Alphawave did pick up some of the AI momentum in 2024 reaching as high £1.93 around March 2024. Credo and Asteral Labs were not burdened with acquisitions, they have healthy cash balances and are on NasDaq which has good exposure to AI related stocks meaning it was easier for those stocks to be affected by the AI euphoria. Meanwhile, Alphawave as an LSE stock was out of the limelight for attention and having difficulties with cash flow and maintaining debt covenants.

----

My rational for investing heavily in Alphawave was that compared to its peers it seemed incredibly undervalued even taking into account its debt position. Especially, when it secured funding via the bond offering, I felt that the company had a really good chance to maintain an independent route to establishing a strong capture of the addressable market. The company maintained that it was always on track to achieve a billion dollar run rate by 2027, and even if that wasn't going to be achieved exactly on time, it was certainly heading in that direction. I knew that Alphawave was likely always going to be an attractive takeover target, but I perhaps underestimated the conservative valuation that potential acquirers would place on it. At the end of the day, I bought in steadily when prices were low and I came away with about an 82% profit on quite a large investment in just over a two year period. Sure, I could have done considerably better if I had instead invested my money in Credo or even Invidia over that period, but unfortunately, I'm not a seer that can see into the future.

For me, IQE is a big no no!

It is true that compound semiconductors is a promising growth area in the coming decade but IQE's share of this growth market is constrained because it is primarily a materials and epitaxy vendor operating in a commoditizing part of the value chain, where barriers to entry are falling, pricing power is weak, and scale is crucial. Although IQE has a portfolio of IP, especially in epitaxial growth methods and some novel materials, its ability to monetise this competitively has historically been underwhelming. Furthermore, the highest growth segments in compound semiconductors — such as GaN power devices and silicon photonics — are increasingly dominated by players with integrated fabs or those co-developing vertical solutions (e.g. Wolfspeed, SkyWater, or Intel’s silicon photonics business), where IQE lacks a compelling presence.

IQE has long struggled with profitability and consistent execution. Over the past several years, the company has gone through multiple strategic resets, management changes, and has underperformed operationally. Revenue in recent years has been flat or declining, margins remain razor-thin, and the company has required periodic capital raises to sustain operations. Even in 2023 and 2024, when compound semiconductor demand should have started recovering from a cyclical trough, IQE’s results have lagged behind peers.

The company has been trying to pivot into more photonics and power-focused applications, investing in new capabilities like VCSELs and GaN-on-Si. But these bets are capital intensive, and IQE is not large enough to outspend bigger rivals nor vertically integrated enough to lock in end customers. While partnerships (e.g. with Porotech or collaborations on GaN) show some promise, they remain early-stage and non-exclusive, limiting their ability to move the needle short-term.

I hope that helps.

The Scheme of Arrangement requires 75% of share votes for approval. The probability of not achieving this number is very low indeed by virtue of the fact that most retail investors have now exited, that most institional investors are aligned with management (you only have to look at the recent AGM voting results to get a hint of that) and 51% of the votes have already been secured.

It is not impossible though. If a rival bidder was desperate they could campaign to institutional holders to convince them vote against the Scheme. There is no indication of that happening though and little time left to do so, therefore chance of rival bid is almost nil.

Jiang,

You flatter me! Thank you for your kind words. I don't currently have any social media accounts where I share my investment views, however, I am tempted to set one up and give it a go. I'm nothing special and I don't yet have proven track record. I certainly don't mind to share my thoughts as long as people take full responsibility for any investment decisions they make, and that they understand that my strategy and reasoning caters to meeting my personal objectives which may differ greatly from others.

Alphawave was a moderate success for me. I had hoped for much better but cannot be dissatified with the end result. As it happens, I sold at 1.85 and have recently bought back in again with same number of shares and with a view to eventually taking up the Alternative 1 offer share swap likely sometime early next year. Assuming the deal completes without issue, Qualcomm will remain one of my mainstay long term investments. It will not have the potential to grow massively but over 5 or more years there is a solid case to expect some reasonable growth in addition to regular dividend income.

With new funds I aim to continue to find undervalued stock with relatively high growth return potential and likely with significantly less risk than I had exposure to with Alphawave. I have found a couple of prospects and I'm currently planning an entry strategy. If you or anyone else wants to know about these, then I shall look at setting up a Substack or WordPress page. I am not a fan of diversification so you should only expect me to report on a very small selection of stocks.

Regards,

BlueRaphus.

"As we reach the likely end of the Alphawave story as an independent company, I would like to express a big thank you to BlueRaphus for a regular supply of extremely useful information and opinion.

Personally, I am a little disappointed the story ended like this as I believe AWE had a lot to offer."

You are welcome. I'm sorry it hasn't worked out to reach its true potential (save for a remote possibility of another bidder coming on the scene). I am a bit disappointed too, although I bought in at an average of £1 - I shouldn't really complain. The management recommending the offer below its true potential was always a risk given that the founders had already made a substantial profit at the IPO. From their perspective, a transfer of their shareholdings to Qualcomm is a safer and more assured route to steady growth. Remaining independent would have carried greater risks even if perfectly achievable.

Https://www.cnbc.com/2025/05/19/qualcomm-to-launch-data-center-processors-that-link-to-nvidia-chips.html

https://nvidianews.nvidia.com/news/nvidia-nvlink-fusion-semi-custom-ai-infrastructure-partner-ecosystem

The news of Qualcomm developing custom CPUs to connect directly with Nvidia GPUs using the newly opened NVLink Fusion architecture is highly significant for Alphawave Semi, regardless of whether Qualcomm formalizes a takeover deal or partnership with them. This development signals a major shift in the data center landscape, where heterogeneous, modular compute architectures — built using chiplets and high-speed interconnects — are becoming the new norm. Alphawave, with its portfolio of SerDes, chiplet interconnect IP, and advanced packaging capabilities, is directly positioned to benefit from this architectural evolution, as it provides the foundational connectivity required to link CPUs, GPUs, memory, and networking subsystems in such modular systems.

Crucially, Nvidia’s decision to open up its previously closed NVLink architecture via NVLink Fusion widens the ecosystem for third-party silicon and IP vendors. It allows companies like Alphawave to play a role in enabling the physical and logical interconnects between custom CPU designs (such as Qualcomm’s) and Nvidia’s dominant GPU compute stack. Even if Qualcomm chooses another partner, the fact that Nvidia is now inviting multiple vendors — including MediaTek, Marvell, Astera Labs, AIchip, Synopsys, and Cadence — into the NVLink Fusion ecosystem shows that third-party connectivity IP and interposer solutions will be essential. This multiplies Alphawave’s potential customer base to include OEMs, hyperscalers, and governments designing NVLink-compatible AI infrastructure.

Furthermore, the timing aligns well with broader industry trends: AI workloads are exploding, and major players are now seeking sovereign or custom silicon that interoperates with Nvidia's GPU dominance without being locked into its proprietary full-stack solutions. Alphawave’s neutral positioning, TSMC alignment, and chiplet-enablement capabilities make it a natural fit for many of these efforts. Whether directly through Qualcomm or indirectly through Nvidia's wider partner and customer network, today's news opens a significantly larger addressable market for Alphawave’s IP and custom silicon services — effectively validating its long-term strategy in chiplet-based connectivity.

NigeCo,

Yes I think being on the LSE instead of NASDAQ is one of the main contributing factors to the undervaluation.

There is a remote possibility in addition to a few other factors that Alphawave may have chosen to list in London because of the better protection LSE rules provide in takeover situations but that’s an aside.

Also, I think there was an expectation by the market that they would reach profitability fairly soon after IPO and instead with each update and annual / interim report released the market has been disappointed. It’s a case of the market expecting more than they should and under appreciating what was required to get where they want to be.

The Wisewave JV is another major contributing factor to the undervaluation. It was a big part of the IPO sales pitch and no sooner had they kicked off the IPO, the geopolitical China situation under the Biden administration turned that prospect sour. It was real hard luck but you have to give credit to Alphawave that despite having to pull out of the JV, they have still managed to up the revenue through the OpenFive acquisition, consolidated it and purged out the lower margin legacy contracts that they inherited from that acquisition.

Last sentence in No. 5 should read:

Proper “firewalling” and governance mechanisms would be essential to preserve Alphawave’s trusted supplier status across the ecosystem.

Some possible key elements you might see in a partnership deal.

1- JDA focused on Specific Technologies or Markets:

The two firms could co-develop next-generation SerDes, chiplet interconnect (UCIe), and CXL IP optimized for Qualcomm’s emerging product lines (e.g., AI inference accelerators, automotive SoCs, or custom silicon for hyperscalers). This could grant Qualcomm early access or co-ownership rights to the IP developed under the JDA, providing it with a first-mover advantage relative to competitors.

The IP could be tailored to Qualcomm’s specs, enabling performance / integration gains, while Alphawave retains broader rights to adapt and sell variants of same IP to the wider market, under different licensing or configuration schemes.

2- Tiered Rights Licensing Agreement:

A tiered licensing model could give Qualcomm preferential / exclusive access to specific Alphawave IP blocks (e.g., 224G SerDes, advanced PCIe/CXL PHYs) in defined markets (such as mobile AI or automotive), while non-exclusive rights continue for other segments. This would give Qualcomm a competitive moat where most needed, without locking Alphawave out of the broader ecosystem.

E.g., Qualcomm might gain 12–24 month lead on next-gen IP in its core markets, while Alphawave is free to license it generally after a defined window, preserving overall TAM expansion.

3- Equity Stake or Convertible Investment

Rather than a full acquisition, Qualcomm could take a minority stake in Alphawave either by direct equity or convertible instruments — this could align interests while stopping short of full control. It would give Qualcomm a seat at the table, potential board representation, and upside participation, without altering Alphawave’s governance or public company status.

This would signal long-term commitment without disrupting Alphawave’s neutrality in the IP license market — an essential consideration for retaining broad customer trust.

4- Revenue Guarantees or Joint Customer Pursuit

Qualcomm might commit to multi-year revenue floor or minimum licensing volume, effectively underwriting part of Alphawave’s revenue growth in exchange for preferred pricing or delivery guarantees. Alternatively, they might jointly pursue large design wins (with hyperscalers or automotive OEMs), where Alphawave acts as the IP/silicon enabler and Qualcomm provides platform integration and SoC-level solutions.

This helps both firms scale while avoiding conflict over markets and customers, and ensures Qualcomm sees clear ROI from without need for full ownership.

5- Non-Compete Boundaries and “Firewalling”

To preserve Alphawave’s ability to serve competitors of Qualcomm, the partnership would need well-defined non-compete boundaries. Qualcomm could agree not to interfere in Alphawave’s commercial relationships outside of the co-developed IP or reserved market segments. Proper “firewalling” and governance mechanisms would be essential to preserve Alphawave’s trust

The structured partnership or JDA scenario is a plausible and strategically sound alternative for Alphawave’s management to take — since it aligns well with the company’s current fundamentals, market positioning, and long-term growth aspirations.

For 2024 year end Alphawave reported $180 million cash, a manageable net debt of ~$172 million, revenue of $308 million, and a 47% increase in backlog to $520m. In other words, the company is in a solid financial position, and it means they do not need to accept a takeover purely for survival or funding reasons — a critical distinction that empowers its board and leadership to seek strategic alignment over outright sale.

From Alphawave's perspective, the optimal outcome could be a structured partnership or joint development agreement with Qualcomm — potentially one that includes licensing, co-design engagements, guaranteed revenue streams, and co-investment in product roadmap development. This kind of arrangement would allow Alphawave to retain its independence, brand, and market optionality, while also benefiting from Qualcomm’s scale, distribution channels, and ecosystem relationships. Importantly, it would still let Alphawave capitalise on the full upside of its roadmap — especially as it seeks to scale into a broader custom silicon and IP powerhouse over the next 3–5 years.

Moreover, being acquired by a much larger entity would constrain Alphawave’s freedom to license IP broadly across the market — particularly to customers or segments that compete with Qualcomm. In contrast, a partnership structure would preserve that open model while deepening technical and commercial integration with Qualcomm in selected areas (e.g. AI inference, automotive, chiplets). This also sidesteps potential cultural, operational, and regulatory frictions that a full M&A process might trigger. Therefore, unless Qualcomm presents an extremely compelling valuation — significantly above Alphawave’s current trading range — It is quite possible that management could instead favour a deal structure that maximises growth, preserves autonomy, and keeps strategic doors open.

Under this scenario we have the potential for significantly higher long-term reward but which does come with risk and depends on the company achieving successful execution and remaining competitive in a stable macro environment and maintaining customer traction.

A well-structured partnership between Qualcomm and Alphawave can be designed to deliver strategic competitive advantages to Qualcomm, while still preserving Alphawave’s independence and commercial flexibility. Such a deal would likely involve a multi-pronged arrangement that balances exclusivity in certain areas with open market access in others. In my next post I will highlight some of the key elements that could be included in such a carefully carved-out strategic deal.

NigeCo,

Analysts forcasts are on the conservative side in my opinion, but I think management are still likely to downgrade the $1 billion 2027 forecast when they do eventually come out with confirmed guidance numbers - perhaps to something like $750m by 2027. It will depend in part on how the tariffs situation ultimately plays out and what that is doing for business confidence in general. Also, if the Qualcomm deal ends up being a structured partnership that deal alone (whatever the specifics) is likely to help start boosting revenues significantly in about 2 years from now.

Qualcomm’s interest in Alphawave stems from its strategic push beyond mobile into high-growth areas like AI compute, data centre acceleration, automotive, and custom silicon — all of which require advanced connectivity IP such as SerDes, PCIe, CXL, and UCIe. Alphawave is practically the ONLY meaningfully acquirable global player available offering this high-performance interconnect IP across multiple foundries, making it highly attractive for Qualcomm’s needs in chiplet-based designs, heterogeneous computing, and silicon integration. By acquiring Alphawave, Qualcomm would gain critical in-house IP, reduce reliance on third-party vendors like Synopsys or Credo, and enhance its ability to serve hyperscalers and automotive clients with differentiated, tightly integrated solutions.

Additionally, Alphawave’s current undervaluation (as I pointed out yesterday) provides Qualcomm with a rare opportunity to acquire a strategically vital company at a significant discount relative to Alphawave’s competitors, with strong long-term growth potential. A deal with Alphawave would not only strengthen Qualcomm’s IP portfolio but also give it a foothold in the custom silicon and ASIC market, allowing it to compete more effectively with players like Nvidia, AMD, and Amazon in next-generation compute infrastructure.

In my opinion, an acquisition of Alphawave by Qualcomm will be at a premium, at least two to three times the present market value. Why? Because as I pointed out yesterday, Alphawave’s peers are trading at substantially higher multiples due to perceived scale, stability and strategic importance. Even at two to three times premium price, Qualcomm would still be acquiring at an accretive valuation based on revenue and EBITDA relative to the peers. In other words, Qualcomm would still be buying cheap – not just on a DCF basis but even on relative multiple basis.

If Alphawave’s long-term guidance of $1B in revenue by 2027 proves even partly correct, Qualcomm would be buying that growth at just 2 x 2025 revenue or 1.3x 2027 revenue, if it pays $2 to $2.5 billion now. Even a 3x acquisition premium is easily justifiable on a 2 to 3 year horizon.

Alphawave is increasingly important to hyperscalers, chiplet players and cloud AI teams. If Qualcomm delays, it risks a competitor stepping in. The ecosystem implications of losing Alphawave to a rival could materially disadvantage Qualcomm’s roadmap. In this light, Qualcomm should not only be willing to pay a premium, it should consider moving preemptively to block others from gaining this strategic asset.

In a separate follow on post I will examine another scenario in which the deal ends up being a structured partnership or joint development agreement and which in the longer term will likely prove far more prosperous to Alphawave shareholders.

The below comparisons are based on the median values of the following competitors:

Rambus, Broadcom, Marvell, Credo, Astera Labs, Arm Holdings.

Alphawave price used: £1.43 ($1.90)

Current AWE P/S multiple = 4.7

Current Competitors’ median P/S multiple = 19.7

This means on a price to sales basis Alphawave’s competitors are 4.2 times more expensive.

If Alphawave was trading at the P/S median value of its competitors its price would be £6.00 today.

However, Price to sales comparisons do not take into consideration of the enterprise value and which also considers the company’s cash position. A more appropriate comparison would be to use the Earnings multiple (ratio of enterprise value to earnings before interest, tax, depreciation and amortisation). We should also look at future earnings rather than current earnings as growth expectations are high for this sector.

Using the 12 months forward earnings multiples data from Alphawave’s competitors and assuming a reasonably modest revenue of $446 million for 2025 for Alphawave we get:

AWE 12-month future EV/EBITDA multiple = 14.95

Competitor’s median 12-month future EV/EBITDA multiple = 30.6

If Alphawave was trading at their competitors’ median value of 12-month forward earnings multiple, the price would be £2.92 today.

Hi hxulcolrdoh,

Interesting point on RISC-V. Alphawave have been very quiet on any mention of being involved in this open architecture for processors. When the company acquired OpenFive in 2022, I recall them talking a fair bit about RISC-V at the first CMD, since that acquisition effectively gives them access to SiFive's RISC-V processor IPs.

At the last CMD, the question was asked about RISC-V in terms of what the company is thinking about it going forward. Mohit answered the question saying that they just happened to be more focused on Arm architecture at present because that is what their customers want presently. In the company's latest report it does show they hold RISC-V licenses, was $5.2m in asset value and currently amortised down to $2.8m.

It is a valid point that access to RISC-V processor IP may be one of the key reasons for the interest by Qualcomm, given their dispute about Arm's dominance on processor IP. As per your video link it does look like that RISC-V is gaining traction although still very early days for it in the datacentre market. In this high tariff world this traction looks set accelerate further outside of the US.

Xtw2,

"Yes, I also thought that there may be significant or some Revenue that isn't incorproated in the Backlog figures. Do you think future Revenue will be impacted by Qualcomm's interest (prior to them potentially making an Offer, that is) e.g that ARM may hold off with Orders because Qualcomm are a competitor?"

First off, there is often revenue not included in backlog. That is because when they get a booking, the value of that booking will be made of NRE and a committed portion revenue from the first run of production. But where a product is already in production, usually once the first committed batches are through, the customer will usually order more production runs of the silicon product and it is these additional runs that adds to revenue not in the backlog. Also, some bookings (e.g. for relatively simple fast track orders) made earlier in the financial year may generate revenue later in the same year.

To answer your question, regarding ARM holding off orders... no, I personally don't think this. ARM and Qualcomm in fact have a partnership despite being competitors of a sort and despite recent tensions due to licensing disputes. Qualcomm is a member of the Total Arm Design ecosystem. Arm's architecture forms the foundation for Qualcomm's Snapdragon processors, which are widely used in smartphones, tablets, and other devices. Qualcomm licenses Arm's designs to develop its own chips, making Arm a critical partner in Qualcomm's ecosystem.

In fact, I would go as far to argue, that instead of Qualcomm making a takeover offer, which in the current climate could be perceived as a bit risky, that a more beneficial outcome of the discussions would be a Qualcomm-Alphawave collaborative partnership given the synergies on offer between the two companies. Ultimately this would be win-win for both companies at much lower cost for Qualcomm. It would also benefit the broader ecosystem inclusive of the Arm Total Design ecosystem and Siemens partnership etc. It is also worth remembering that Alphawave are in partnership with Rebellions. Rebellions in turn are also part of the Arm Total Design ecosystem.

Xtw2,

Yes this link should do the trick:

https://www.youtube.com/watch?v=eOkTlLtppuM&t=12s

"I recall specifically that he said about $80m would be in 2026 and he said leaving about $440m for 2025 but that it depends on the timing of revenue recognition which is actually difficult to predict. We can check the transcript of the call when it comes through but that is what I remember."

I have had a chance to look at the transcript to see what was said exactly and InverseMe you are correct.

This is what the CFO said:

"When I look at our backlog, our backlog continues to be very strong. So when I think about it we ended last year with about 520 million of backlog, and as I said earlier about 80 million of that is for silicon shipments that are now scheduled for 26 and beyond. So, if you take that out, then what you get is something in the the 440 range, and typically that backlog then goes out over 12 to 18 months. And so that gives you a bit of indication of how much would happen in the next 12 months and how much would happen in the next 18 months."

So while noting that the remaining 440 backlog is over the next 12 to 18 months, given they were forecasting 450 million previously, I would still argue that a larger portion than 2/3 rds would likely come in within the next 12 months and the rest would come from the production revenue which isn't included in the backlog plus the connectivity products I mentioned previously. The CFO mentioned the additional revenue not included in backlog in the previous interims investor call where he said:

"Another thing to note is that the 486 million of backlog at the end of first half does not include a substantial portion of production revenue expected in the future. Our silicon revenue is recorded as revenue on a transaction basis like typical conductor product revenue."