The growth potential for artificial intelligence (AI) as the technology is adopted across a wide spectrum of industries has been a hot topic for investors over the past year. Touted as one of the most influential and revolutionary technological developments of the past century, AI looks poised to impact just about every aspect of daily life in the coming years.
And the proverbial beating heart of this AI revolution are specialized semiconductor chips, an essential component to the computing architecture necessary for advanced AI tasks. With the global chip industry set to reach a market size of $1.13 trillion by 2033, semiconductors are effectively among the “shovels” being used to dig up the AI “gold.”
While the AI chip stocks that have benefited the most so far are names like Nvidia (NVDA) and Advanced Micro Devices (AMD), old-school semiconductor company Qualcomm (QCOM) shouldn’t be overlooked as the next wave of AI deployment rolls out to devices. Here’s a closer look at QCOM.
About Qualcomm Stock
Founded in 1985 and based out of San Diego, Qualcomm Inc (QCOM) designs and licenses semiconductor chips for mobile and wireless communication devices. The company also expands into automotive technology and computing markets. Its market cap stands at a substantial $182 billion.
Qualcomm stock has gained a healthy 15% on a YTD basis, outpacing the tech-heavy Nasdaq-100 Index. Longer term, QCOM is up 35% over the past 52 weeks.
Even after such a strong share price performance, Qualcomm stock remains reasonably valued at current levels. The stock is priced at 16.86x forward adjusted earnings, marking a discount to the tech sector median. The stock also offers a dividend yield of 1.96%, more generous than the tech sector median. Qualcomm has raised its dividend consistently each year for 20 years.
But does QCOM have the legs to run higher? Let’s see what analysts are saying.
QCOM Beats on Fiscal Q1 Earnings
Qualcomm’s latest results for its fiscal first quarter were strong, with both revenue and earnings exceeding Wall Street’s expectations. The company reported revenues of $9.9 billion, up 5% from the previous year. The top line was driven by yearly growth in its core QCT business to $8.4 billion. EPS rose 16% year-over-year to $2.75, exceeding the consensus estimate of $2.37.
On the liquidity front, the company closed the quarter with a cash balance of $8.2 billion, up markedly from the previous year’s $5.1 billion. Looking ahead, analysts expect earnings and revenue growth for fiscal years 2024 and 2025.
How Will Qualcomm Benefit from AI?
At the 2024 Mobile World Congress, Qualcomm CFO and COO Akash Palkhiwala highlighted the company’s poised benefits from AI deployment in various devices. Qualcomm has been extending licensing agreements with key mobile device partners, notably with Apple and Chinese OEMs. The company also announced Snapdragon 8 Gen 3 Mobile platform, bringing generative AI capabilities to top-tier Android smartphones.
QCOM’s Broad Portfolio
In addition to smartphones, Qualcomm’s portfolio extends to the automotive segment with the Snapdragon Digital Chassis Solution. The company also announced a partnership with Bosch for automotive technology. Mixed reality is another focus area for Qualcomm, with the Snapdragon XR2+ Gen 2 aiming to deliver high-quality and immersive experiences. On the IoT front, Qualcomm introduced the Snapdragon X35 5G Modern-RF system, a 5G platform for IoT devices.
What Do Analysts Expect for QCOM Stock?
Analysts have an average rating of “Moderate Buy” for QCOM stock. Out of 25 analysts, 15 have a “Strong Buy” rating, 9 have a “Hold” rating, and only 1 has a “Strong Sell” rating. The mean target price is $150.38, with some analysts forecasting a Street-high target price of $180, implying an upside potential of about 7.8% from current levels.
