Qualcomm Inc., a prominent chip designer, is quietly emerging as a potential standout in the ongoing AI hardware revolution. Following its robust second-quarter financial results, which surpassed expectations, Qualcomm’s stock experienced a notable uptick, driven by the growing optimism surrounding its advancements in artificial intelligence (AI). The company’s recent emphasis on AI capabilities has sparked excitement, particularly as it positions itself at the forefront of next-generation smartphones and personal computers, with its cutting-edge chips slated to power these devices, some of which are expected to hit the market later this year.
During the earnings call, Qualcomm’s Chief Executive Officer, Cristiano Amon, underscored the company’s strategic readiness to capitalize on the expanding AI landscape, particularly at the edge where devices operate. A significant highlight is Qualcomm’s neural processing unit (NPU), which is poised to facilitate compute-intensive AI tasks on devices like smartphones and laptops without compromising battery life. Notably, the Snapdragon 8 Gen 3 chip, featuring Qualcomm’s NPU, has garnered significant traction, especially in high-end Android smartphones, with robust demand observed, particularly in key markets like China.
Moreover, Qualcomm’s Snapdragon X Elite chip is set to make waves in the AI-enabled PC market, with leading PC manufacturers incorporating the chip into their new offerings from mid-2024 onwards. While this move is expected to bolster Qualcomm’s Internet-of-Things (IoT) business unit, the full impact may materialize by fiscal 2025. Amon directed analysts’ attention to the Microsoft Build event for insights into the proliferation of on-device AI and the momentum behind product launches, hinting at a potential uptick in Qualcomm’s IoT segment performance in the coming years.
If Qualcomm’s AI ambitions come to fruition, the company could emerge as a formidable competitor to industry giants like Intel Corp. and Advanced Micro Devices Inc. in the burgeoning AI-enabled PC chip market. Despite the promising prospects, Qualcomm’s stock has not experienced the same level of exuberance witnessed by its peers like AMD and Nvidia, which have witnessed significant stock price gains fueled by anticipation of AI-driven revenue growth.
While Qualcomm’s stock performance has been commendable, with a 42% increase over the past year, it still lags behind other chip makers that have experienced more substantial gains. Nonetheless, analysts like Stacy Rasgon from Bernstein Research remain optimistic about Qualcomm’s potential in AI-related smartphone content and AI PCs, considering them avenues for monetization and potential value creation.
In the coming quarters, investors will closely monitor Qualcomm’s performance and the impact of its AI capabilities on the smartphone market. The company’s strategic initiatives in AI hardware and its execution will likely shape its trajectory and investor sentiment moving forward.
