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Is There More to Qualcomm Than Meets the Eye? Unpacking Their May Report

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    TechStockTracker  TechStockTracker

    As a seasoned financial journalist, TechStockTracker has made it their mission to decode the complex world of finance and investments, with a special emphasis on the dynamic intersection of technology and dividend growth stocks. With a keen eye for market trends and an uncanny ability to sift through data, TechStockTracker has become a trusted advisor for investors seeking to navigate the ever-changing landscape of finance.


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Qualcomm Q1 2024 earnings report is eagerly anticipated, with Wall Street divided on the company's near-term performance
Long-term, Qualcomm is poised to benefit from the rise of AI in edge devices, potentially adding several billion in annual revenue
The company's Snapdragon X Elite chips for PCs could also unlock new growth avenues, challenging Intel and AMD
Three key ways AI will drive Qualcomm future: increased adoption in premium smartphones, market share gains, and device upgrade cycles

Qualcomm, the global leader in smartphone chipsets, is set to report its Q1 2024 earnings on May 1st. As the company navigates a challenging smartphone market, investors are closely watching for signs of Qualcomm's long-term growth potential, particularly its ability to capitalize on the rise of artificial intelligence (AI) in edge devices.


While Wall Street is divided on the company's near-term performance, with some analysts anticipating a potential disconnect between optimism and reality, the long-term outlook for Qualcomm appears increasingly promising. The key lies in the company's ability to leverage its expertise in mobile processors and adapt to the evolving technological landscape, where AI is poised to play a transformative role.


Qualcomm's AI-Powered Future


Qualcomm's stock has already seen a strong start to 2024, with a 21% year-to-date gain and a 44% increase over the past year. This performance reflects the market's optimism about the company's ability to capitalize on the increasing demand for advanced chipsets and the potential boost from AI.


Bernstein, a leading research firm, believes Qualcomm could see an 18% upside from current levels, highlighting the company's potential as a primary beneficiary of the growing focus on running AI on edge devices rather than in the cloud. As today's computing architectures evolve to include not only CPUs and GPUs but also specialized neural processing units (NPUs) for AI, Qualcomm is well-positioned to meet the rising demand.


"While generative artificial intelligence has been the main topic of conversation for more than a year, the potential of artificial intelligence in edge devices is now gaining momentum as both companies and investors begin to think about how these technologies might eventually reach the masses," the Bernstein analysts wrote.


Three Ways AI Will Drive Qualcomm's Growth

Increased Adoption in Premium Smartphones: The smartphone industry, which has faced challenges in recent years, is now moving towards more premium devices with higher average selling prices. Qualcomm has thrived in the 5G era, and the company's management believes that the adoption of AI could enable similar growth in the premium smartphone segment, potentially allowing Qualcomm to maintain annual growth of 10%-15% in this market.
Market Share Gains: Qualcomm's new AI-powered chips are already demonstrating strong performance, competing closely with rival offerings and even surpassing them in certain AI-centric benchmarks. This could translate into market share gains for Qualcomm, further solidifying its position as the go-to choice for smartphone manufacturers seeking the latest in AI capabilities.
Device Upgrade Cycles: The development of powerful AI applications that drive the need for more capable devices could trigger a large upgrade cycle, similar to the impact of 5G. While Wall Street believes this is unlikely to happen in the near term, the long-term potential for AI-fueled device upgrades remains a significant opportunity for Qualcomm.

Snapdragon X Elite: Challenging Intel and AMD in PCs


In addition to the AI-driven opportunities in the smartphone market, Qualcomm is also making inroads into the personal computer (PC) segment with its Snapdragon X Elite chips. These ARM-based processors are designed to offer performance that matches and even surpasses the advanced chips from industry giants Intel and AMD.


While the exact scale of the demand for ARM-based PCs is yet to be determined, analysts estimate that Qualcomm could potentially add several billion dollars to its annual revenues and up to a dollar to its earnings per share if it can successfully capture a meaningful share of this emerging market.


Navigating the Smartphone Market Challenges


Despite the long-term optimism surrounding Qualcomm's AI-powered future, the company's near-term performance is not without its challenges. JPMorgan analysts have raised concerns about the strength of the expected recovery in the smartphone market, noting that data from the Chinese market in particular has raised some red flags.


The bank predicts that Qualcomm's revenues in the March quarter will be $9.5 billion, slightly above the midpoint of the company's forecast and the Wall Street consensus, which both stand at $9.3 billion. However, JPMorgan expects Qualcomm's forecasts for the June quarter to be in line with analysts' expectations at $9.1 billion, which may not be enough to satisfy investors.


The limited potential for a positive boost from the various factors, such as the smartphone market, despite the strong performance of the stock to date, may pose a challenge to the stock price in the short term. While JPMorgan does not expect a decrease in profit forecasts, the analysts wonder if Qualcomm's current price is not too high.




Qualcomm's Q1 2024 earnings report will be a crucial moment for the company, as it navigates the complexities of the smartphone market while positioning itself for long-term growth driven by the rise of AI in edge devices. The company's ability to capitalize on its technological expertise and adapt to the evolving industry landscape will be key to unlocking the true potential of its AI-powered future.


Investors should closely follow Qualcomm's performance and strategic initiatives, as the company's success in the AI space could have far-reaching implications for its competitive positioning and financial prospects in the years to come.


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