Qualcomm Is the Problem Child of the Current Chip Rally
The company is selling the dream that it will become a major player in data center AI chips, from AI accelerators to CPUs.
Chip stocks are having a historic run. Since the beginning of April, the semiconductor index is up nearly 60%.
Key Context has been all over the improving fundamentals of CPUs, GPUs, and HBM memory names on the exponential compute demand ramp from agentic AI, weeks and months ahead of Wall Street. The rallies in many of those companies make sense, as earnings expectations have risen significantly.
One name that has also risen may not deserve it: Qualcomm.
Qualcomm shares are up more than 80% since the end of March, driven by growing optimism that the company will remake itself as a winner in the artificial intelligence trade. The stock kept climbing even after the chipmaker reported mixed financial results in late April with disappointing current quarter midpoint guidance of $9.6 billion in revenue and $2.20 in EPS versus consensus estimates of $10.3 billion and $2.43 in EPS.
A vague comment from management during the earnings call about a custom chip deal with a hyperscaler was enough to boost the shares higher. The company said it will reveal more details during its analyst day in June.
Qualcomm is selling the dream that it will become a major player in data center AI chips, from AI accelerators to CPUs. CEO Cristiano Amon also recently told Fortune that Qualcomm is working with AI companies on future wearable devices.
Caution is in order. Let’s start with the core business, then examine each of these supposed growth opportunities.
The Core Business Is Eroding
Qualcomm’s main businesses include mobile processors and wireless modem chips. Both are under pressure. Apple has started using its own internal modem chips and is set to expand that transition to more iPhone models later this year. On the Android side, phone sales are getting crimped by higher memory chip prices. The core business is at risk of driving earnings materially lower going forward.
