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Qualcomm soars as AI ignites recovery in the Chinese smartphone market

ByYasmeeta Oon

May 6, 2024
Qualcomm soars as AI ignites recovery in the Chinese smartphone market

Qualcomm soars as AI ignites recovery in the Chinese smartphone market

In a remarkable surge, shares of Qualcomm (QCOM.O) soared by approximately 10%, reaching a level not seen in over two years, driven by signals of a robust demand rebound, particularly in China. The smartphone-focused chipmaker’s bullish momentum was attributed to a resurgence fueled by artificial intelligence (AI), notably in the Chinese market. The company’s sales to Chinese smartphone manufacturers witnessed a staggering 40% jump in the first half of the fiscal year, indicating a shift towards higher-priced devices equipped to accommodate AI functionalities such as chatbots.

Analysts point out that Chinese vendors, traditionally reliant on MediaTek, are increasingly turning to Qualcomm’s high-end chips, aligning with their aggressive AI strategies. Nabila Popal, an analyst at IDC, highlighted this shift, stating, “Chinese vendors who traditionally relied more on MediaTek, are going to start leveraging Qualcomm’s high-end chips more as they push hard into the AI Agenda.”

Moreover, Qualcomm foresees a significant portion of its recovery driven by Chinese original equipment manufacturers (OEMs), marking a substantial turnaround following a challenging period over the last two years. The company’s optimistic projections for third-quarter sales, surpassing estimates, underscore the growing influence of its Internet of Things (IoT) and automotive segments in addition to its smartphone chip business.

Qualcomm’s dominance in the smartphone chip market positions it as a key player poised to benefit from the burgeoning AI trend and the evolving preferences of consumers, particularly in the high-end segment. Preliminary data from research firm IDC suggests that AI innovations and the introduction of foldable products have enabled Android smartphone vendors to differentiate themselves from competitors like Apple (AAPL.O), garnering heightened interest from Chinese consumers.

Analysts at Wolfe Research express optimism about Qualcomm’s future performance, anticipating further growth driven by last year’s subdued Android cycle and the normalization of inventory levels in the IoT sector. LSEG data indicates that at least 14 analysts have revised their price targets upwards for Qualcomm, reflecting the widespread confidence in the company’s trajectory.

In early trading, Qualcomm’s shares surged by 9.7% to reach $180.31, extending the impressive 13.5% gain recorded thus far in the year. The positive momentum in Qualcomm’s stock is mirrored by a broader uptick in the semiconductor sector, as evidenced by the 1.4% rise in the Philadelphia Semiconductor index (.SOX), following a previous day’s dip prompted by underwhelming results from chip giants Advanced Micro Devices (AMD.O) and Super Micro Computer (SMCI.O).

As the technology landscape continues to evolve, Qualcomm’s strategic positioning and innovative product offerings underscore its resilience and potential for sustained growth in the dynamic global market. With AI-driven advancements reshaping consumer preferences and market dynamics, Qualcomm remains at the forefront of technological innovation, poised to capitalize on emerging opportunities and drive shareholder value.

MetricQualcomm (QCOM.O)Apple (AAPL.O)
Stock Price (May 6)$180.31Pending
Year-to-Date Gain+13.5%Not Available
  • Qualcomm’s shares surged by approximately 10%, reaching a more than two-year high, propelled by an AI-fueled rebound in demand, particularly in China.
  • Chinese smartphone makers’ increasing adoption of Qualcomm’s high-end chips signals a strategic shift towards AI-driven devices.
  • Qualcomm’s optimistic sales projections for the third quarter underscore the company’s diversified revenue streams, including IoT and automotive segments.
  • Analysts anticipate further growth for Qualcomm, buoyed by the resurgence in the Android market and the normalization of IoT inventory levels.
  • The broader semiconductor sector witnessed a rebound, with the Philadelphia Semiconductor index rising by 1.4% following a previous day’s decline.

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Featured Image courtesy of DirectIndustry e-Magazine

Yasmeeta Oon

Just a girl trying to break into the world of journalism, constantly on the hunt for the next big story to share.

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