It was clear last fall that Qualcomm (NASDAQ:QCOM), the longtime leader in phone modems, needed a new growth story. Qualcomm stock had a terrible 2023. Sales fell 19% . CEO Cristiano Amon talked about Phone sales were weak, especially in China. That also dropped
Apple (NASDAQ:AAPL) also renewed its promise . The new date for losing that business is 2027.
It seems devices weren’t ready for the AI revolution and consumers held back. Investors took it hard, twice sending Qualcomm stock down to near $100 during the year. Chasing those sweet AI infrastructure profits, the consumer market was left by the roadside.
But with infrastructure building, and applications coming, interest in the consumer side of the AI market is returning. Qualcomm stock is up 38% in 2024 and going higher.
Here’s why.
A Closer Look at Qualcomm Stock
Qualcomm investors are betting it can become a major PC chip supplier. PCs and phones are increasingly similar on the inside. Qualcomm found a partner in ARM Holdings (NASDAQ:ARM).
Qualcomm’s chips, based on a design licensed from ARM, is winning . With it, Qualcomm against PC incumbents Intel (NASDAQ:INTC) and 91¶¶Òõ (NASDAQ:91¶¶Òõ).
Windows PC processors have been But ARM Analysts at CounterPoint believe ARM laptops of the market by 2027.
But Qualcomm won’t have this market all to itself. ARM has told analysts it will have making a variety of PCs at different price points.
Qualcomm’s move into PCs began in 2021 when it bought . Dell Technologies (NASDAQ:DELL) lists a Qualcomm-based PC among the designs it will release .
Analysts have called the latest Qualcomm chip It has a neural processing unit that can run .
Microsoft (NASDAQ:MSFT) will also feature a Qualcomm chip in . Microsoft has launched an for developers whose software must support Qualcomm PC chips.
Back at the Ranch
Meanwhile, Qualcomm still has of the market for phone processors. This includes 60-70% of the market for Android processors in phones costing . This should mean some big quarters as China’s Android market .
There are, of course, two bearish trends for Qualcomm in the phone market. Apple is one, as it works to make all its chips itself. The other is , a Taiwanese company that has against 23% for Qualcomm.
It should also be noted that Qualcomm is also . That segment’s growth of nearly 25% helped power Qualcomm to record earnings in the most recent quarter.
The Bottom Line
Qualcomm has been bid to a price to earnings ratio of 25 and a price to sales ratio of 6. This despite numbers that, on the surface, look mediocre.
But AI has been a tidal force in the tech market. Infrastructure caused it to flow out from Qualcomm in 2023. It looks set to flow back in, toward client devices, starting this fall.
Qualcomm should reap at least some of the rewards. While huge PC growth is speculative, it’s not unlikely, given Qualcomm’s strength with ARM OEMs like Dell and HP (NYSE:HP), as well as Taiwanese OEMs like Asus.
The stock is fully priced here, but Qualcomm is well positioned to succeed over the next year.
As of this writing, Dana Blankenhorn had a LONG position in AAPL, INTC, and MSFT. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
