The rise of artificial intelligence (AI) across various industries has stirred investor interest, with its potential impact deemed revolutionary. Central to this AI wave are specialized semiconductor chips, crucial for advanced computing tasks. As the chip industry gears up for a projected $1.13 trillion market by 2033, semiconductors are likened to the tools unearthing AI’s potential gold.

While Nvidia (NASDAQ:NVDA) and Advanced Micro Devices (NASDAQ:AMD) dominate the AI chip spotlight, Qualcomm (NASDAQ:QCOM), a veteran semiconductor player, emerges as a key contender for the forthcoming AI integration. Here’s a closer look at Qualcomm’s prospects.

About Qualcomm Stock

Established in 1985 in San Diego, Qualcomm Inc (NASDAQ:QCOM) designs and licenses semiconductor chips primarily for mobile and wireless communication devices. With a market cap of $182 billion, Qualcomm is expanding into automotive and computing markets.

Qualcomm stock has surged 15% YTD, surpassing the tech-heavy Nasdaq-100 Index’s 10.5% gain. Despite this rally, Qualcomm remains reasonably valued, trading at 16.86x forward adjusted earnings, below both the tech sector median and its 5-year average. Additionally, it offers a 1.96% dividend yield, backed by 20 consecutive years of dividend increases.

Financial Performance and Outlook

Qualcomm’s fiscal Q1 earnings exceeded expectations, reporting $9.9 billion in revenue, primarily driven by a 7% growth in its core QCT business and a 31% increase in automotive revenue. EPS rose 16% year-over-year to $2.75, surpassing estimates.

With a cash balance of $8.2 billion and minimal short-term debt, Qualcomm exhibits robust liquidity. Analysts project earnings growth of 15.7% for the fiscal year 2024 and approximately 11% for fiscal 2025, with revenue expected to increase by 6.14% and 8.28% respectively.

Qualcomm’s AI Potential

Qualcomm stands to benefit from the widespread deployment of AI, particularly with its recent announcement of the Snapdragon 8 Gen 3 Mobile platform, facilitating generative AI capabilities in top-tier Android smartphones. Partnerships with industry giants like Apple and Samsung further solidify its position in the AI ecosystem.

Diverse Portfolio

Beyond smartphones, Qualcomm’s portfolio extends to automotive technology, mixed reality, and the Internet of Things (IoT). Collaborations with companies like Bosch and advancements in mixed reality technology demonstrate Qualcomm’s versatility and potential for growth.

Analyst Expectations

Analysts maintain a “Moderate Buy” rating for Qualcomm stock, with a mean target price of $150.38, indicating a slight discount from current levels. However, several analysts forecast a higher target price, suggesting a potential upside of approximately 7.8%.

In conclusion, Qualcomm’s diversified portfolio, strong financial performance, and promising outlook in AI integration position it as an attractive investment opportunity in the semiconductor industry.

Featured Image: Freepik

Please See Disclaimer