BrainChip shares rocket 6% on new chip deal

BrainChip Holdings Ltd (ASX: BRN) shares are back in focus on Monday after a new announcement landed before market open.

At the time of writing, the BrainChip share price is up 6.45% to 16 cents.

Adding in today’s increase, the stock has now climbed about 13% over the past month.

But while this shows some momentum, it remains down roughly 35% over the past year on the back of a weakened tech sector.

Here’s what the company just reported to the market.

New licensing deal opens another pathway

In its release, BrainChip announced it has entered into an IP licence agreement with South Korea-based Asicland Co Ltd (KOSDAQ: 445090).

The deal gives ASICLAND non-exclusive, worldwide access to BrainChip’s Akida neuromorphic AI technology. This allows ASICLAND to integrate Akida into its own system-on-chip designs for customers across multiple industries.

There is also a pathway from evaluation into full production.

ASICLAND can start with prototype and testing licences, then convert those into production licences if projects move forward.

BrainChip keeps ownership of its intellectual property and retains the option to work directly with end customers on additional services.

How the commercial model works

The structure follows a familiar model used across the semiconductor IP industry.

There are upfront fees for evaluation and production, along with ongoing royalties tied to chip sales. Extra service fees can also come into play depending on the level of support required.

Management said it’s too early to put a figure on it, but expects the agreement to contribute revenue over time.

ASICLAND is positioned as both an enabler and a channel partner. It designs custom silicon solutions and works with customers across edge AI, industrial, automotive, and IoT markets.

Why investors are paying attention

Deals like this usually get attention because they show the tech is starting to move beyond development.

BrainChip has spent years developing its neuromorphic technology. What investors want to see now is evidence that it is being picked up and used in real products.

This agreement adds another partner to the ecosystem and creates more potential entry points into customer programs.

But while it does not guarantee near-term revenue, it does add more opportunities if these projects move forward.

Foolish Takeaway

This is another step forward for BrainChip, but there is still a significant gap between signing deals and seeing actual revenue.

Licensing agreements only start to matter once they move into production and generate ongoing royalties, which takes time and depends on customer uptake.

With this in mind, I would be watching from the sidelines until these partnerships come to fruition.

The post BrainChip shares rocket 6% on new chip deal appeared first on The Motley Fool Australia.

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Motley Fool contributor Aaron Teboneras has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.