The stocks are not down so much today (Thursday the 24th), not beyond the general jitters the market's had of late. But the fact is, this wasn't really the triggering of mutual self-destruction. More likely than not, Qualcomm will be able to negotiate somewhere between their higher and lower rates with the Nuvia chips providing the axis around which the debate will turn.
Ultimately, I thing, the re-negotiated terms will benefit Qualcomm, as I don't see them getting worse. But how long the litigation will take and how hard ARM can negotiate with Qualcomm is anyone's guess.
For something better than a wild guess, we can look at how Qualcomm handled their modem litigation with Apple. Qualcomm couldn't recognize a lot of revenue and therefore profits for many years due to Apple withholding payments
<a href="https://www.theverge.com/2019/5/1/18525962/qualcomm-apple-settlement-4-5-billion-dollars-patent" rel="nofollow">https://www.theverge.com/2019/5/1/18525962/qualcomm-apple-se...</a>
In the end, Qualcommm received a multi-billion dollar lump sum payment AND Apple signed a long-term deal (this was back in 2019, so). Something Apple is still trying to get away from, by the way.
I don't think ARM has the financial firepower to withstand a trial as long as Apple did, which took multiple years - but even that Qualcomm may deem temporary given where they are now.
The negotiations have begun, I'm not sure I would read any further into this move by ARM.
As for the reputational hit against ARM, well, that is hard to measure, for me at least. But it's an interesting thought. I feel like the relationship between ARM and its customers are something like TSMC's foundry business. I can't imagine TSMC even threatening to stop manufacturing the chips of Qualcomm. But TSMC's other customers prob wouldn't blink. And neither might ARM's.