We’ve been closely tracking Qualcomm’s performance and market volatility, particularly in comparison to its peers. Despite being a technology leader, recent developments suggest it’s time to reallocate our capital to higher-growth opportunities.

Qualcomm held an investor day last week, typically a forum for companies to share exciting updates. Unfortunately, the event lacked the impactful announcements the market had hoped for.

The original investment thesis for Qualcomm revolved around its foray into processors for AI-enabled personal computers. While CEO Cristiano Amon highlighted that PC chips are “exceeding expectations,” this segment remains a small fraction of Qualcomm’s overall business.

Qualcomm’s primary revenue streams wireless semiconductors for mobile phones and intellectual property (IP) licensing, are showing signs of vulnerability.

Although every 3G, 4G, and 5G-enabled phone uses Qualcomm’s IP, its largest customer, Apple, is developing in-house wireless chips. While Apple has faced challenges in this endeavour, rumours suggest significant progress, posing a clear risk to Qualcomm’s future semiconductor sales.

Though it will retain its licensing revenue, this shift threatens Qualcomm’s current financial engine.  Adding to the challenge, NVIDIA (NVDA) delivered blockbuster quarterly results last week, growing revenue by an astonishing 94% year over year. NVIDIA’s dominance in the AI market continues to expand, with CEO Jensen Huang forecasting sustained demand for their GPUs.

Wall Street has become increasingly fixated on companies with direct exposure to the AI boom, leaving Qualcomm at a comparative disadvantage.  While Qualcomm remains a solid company with strong fundamentals, its lack of significant AI leverage and the looming threat of reduced mobile chip sales make it less compelling in the current market environment.

The stock, up 113.18% year-to-date, has pulled back significantly from its all-time high in June 2024 (42.99% above today’s levels). With institutional investors showing signs of disappointment, further downside risk remains.

At present, there are stronger opportunities for outsized returns elsewhere. Protecting gains and minimizing exposure to further downside is the prudent move.

Action to Take:

Sell Qualcomm (QCOM) at current market prices.

Warmest regards

Stuart

Stuart Langan

Founder and Editor

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Disclaimer: SPI-Club provides information and guidance but does not offer investment advice. Please conduct your research and consult with financial professionals before making any investment decisions.