Qualcomm (QCOM) investors have been eagerly eyeing the potential for the company’s stock to soar, and there are three key reasons behind this optimism.
In 2023, Qualcomm faced a challenging year with a 19% drop in sales and a 43% decrease in net income. The decline was attributed to weak phone sales, particularly in China, which also impacted licensing revenues. Apple (AAPL) further added to the pressure by announcing plans to stop purchasing Qualcomm modems by 2027.
Despite these setbacks, Qualcomm’s fortunes have taken a positive turn in 2024, with the stock already up by 38%. The resurgence can be attributed to the growing interest in the consumer side of the AI market, driven by infrastructure development and emerging applications.
One of the key factors driving Qualcomm’s stock growth is its foray into becoming a major PC chip supplier. Leveraging its partnership with ARM Holdings, Qualcomm’s Snapdragon X Elite chips, based on ARM’s design, have been securing numerous OEM contracts. Analysts predict that ARM laptops could capture 25% of the market by 2027, posing a significant challenge to PC incumbents like Intel and AMD.
Qualcomm’s strategic move into the PC market began in 2021 with the acquisition of chip designer Nuvia. Dell Technologies has already announced plans to launch a Qualcomm-based PC in 2025, with analysts dubbing the latest Qualcomm chip as ‘the laptop chip of Intel and Apple’s nightmares’ due to its advanced neural processing capabilities.
Furthermore, Qualcomm continues to maintain a strong presence in the phone processor market, holding 30% market share overall and dominating the Android processor market for phones priced above $300. With China’s Android market showing signs of growth, Qualcomm is poised for significant gains in the coming quarters.
However, challenges persist for Qualcomm in the phone market, particularly with Apple’s shift towards in-house chip production and the competition from Taiwanese company MediaTek. Despite these headwinds, Qualcomm’s strategic moves in the PC market and its strong position in the phone processor segment indicate a promising outlook for the company’s stock performance.
