The AI Shift: Qualcomm’s Ambitious Leap into Next-Gen Computing and Mobile AI

TipsForTraders | May 2, 2024

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Qualcomm Inc. (QCOM) is emerging as a potentially underestimated player in the artificial intelligence (AI) hardware sector. Amid the expanding AI landscape, the company recently reported encouraging second-quarter results, which saw its shares climb nearly 4% in after-hours trading. This performance was bolstered by Qualcomm’s advancements in AI technologies, particularly in mobile and computing devices.

The company, traditionally recognized for its mobile chips in smartphones, is making significant strides in AI through its neural processing unit (NPU). Qualcomm’s NPU is designed to enable compute-intensive AI tasks to run efficiently on devices such as smartphones and laptops without draining battery life. Notably, Qualcomm’s Snapdragon 8, Gen 3 chip has already been integrated into high-end Android smartphones, receiving positive feedback from consumers, especially in China.

Looking ahead, Qualcomm is set to expand its AI reach into the personal computer market. Its Snapdragon X Elite chip is slated to be incorporated into leading PC manufacturers’ new AI-powered PCs starting in mid-2024. However, this advancement is not expected to significantly impact its Internet-of-Things (IoT) business unit until fiscal 2025.

During a recent earnings call, Qualcomm’s CEO, Cristiano Amon, emphasized the company’s advantageous position as AI technology migrates from cloud-based systems to on-device platforms. Amon highlighted the growing momentum of product launches, particularly those that will coincide with the back-to-school season, pointing to a more substantial impact in fiscal 2025 within the IoT segment.

Qualcomm’s aspirations could position it as a formidable competitor to established giants like Intel Corp. (INTC) and Advanced Micro Devices Inc. (AMD), both of which are also advancing their PC chips to support AI computations on devices. While companies like AMD have seen a significant surge in their stock value, up about 61% over the past year due to AI-driven growth, Qualcomm has posted a more modest increase of about 42% in the same period.

The disparity in stock performance among these companies highlights varying investor expectations and market reactions to their respective AI initiatives. For instance, Broadcom Inc. (AVGO) and Nvidia Corp. (NVDA), known for their aggressive pursuit of AI technologies, have seen their shares jump about 95% and 187%, respectively, over the past year.

Industry analysts, such as Stacy Rasgon from Bernstein Research, have acknowledged the potential for Qualcomm to capture more market interest through its AI-enhanced offerings. Rasgon recently noted the “burgeoning narrative around AI-related smartphone content and potentially, AI PCs.” He sees these developments as not just immediate revenue generators but also as long-term growth avenues as the Snapdragon X Elite platform gains traction.

While it is still early to determine the full impact of AI on Qualcomm’s market position, especially in revitalizing the stagnant smartphone market, the next few quarters will be critical. Investors and market watchers will be keenly observing how Qualcomm’s integration of AI into various device platforms translates into financial performance and market share gains.

In conclusion, Qualcomm appears well-positioned to leverage its technological innovations in AI to challenge the dominance of its rivals in the semiconductor industry. As the company continues to deploy its AI capabilities across mobile and computing devices, its potential to reshape the competitive landscape in the AI hardware market cannot be underestimated. The ongoing developments will undoubtedly provide a clearer picture of Qualcomm’s trajectory in the burgeoning AI sector.