Shares of Qualcomm (NASDAQ: QCOM) and Intel (NASDAQ: INTC) have been moving in divergent directions this year, a fact that may appear somewhat unexpected initially given that both semiconductor manufacturers have been encountering challenges in their primary markets and have been banking on the widespread adoption of artificial intelligence (AI) to reverse their fortunes.
Despite facing difficulties due to a decrease in personal computer (PC) sales in recent years, Intel has witnessed a notable decline in its business. Conversely, Qualcomm has been facing issues due to sluggish smartphone sales. Both these target markets are anticipated to experience significant benefits from the integration of AI. Nevertheless, Qualcomm’s remarkable 19% increase and Intel’s stark 23% decline in the stock market in 2024 suggest that the former is possibly outperforming in terms of leveraging the AI trend.
Let’s delve deeper to confirm if this assertion holds true and if Qualcomm emerges as the superior choice for AI out of the two.
An Argument for Qualcomm
The turnaround in the smartphone sector is anticipated to unfold in the ongoing year, with analysts foreseeing a similar trajectory for Qualcomm. In fiscal 2023 (which concluded on Sept. 24, 2023), the chipmaker observed a 19% drop in revenue compared to the preceding year, reaching $35.8 billion, while adjusted earnings plummeted by 33% to $8.43 per share. This decrease was not unexpected, with smartphone shipments dropping by an estimated 3.2% in 2023 according to IDC, following a significantly larger decline of 11.3% in 2022.
For the current year, analysts are optimistic about an upsurge in Qualcomm’s revenue, followed by further advancements in the subsequent fiscal years. This positive outlook is evident from the illustrated chart:
QCOM Revenue Projections for the Ongoing Fiscal Year Chart
The expansion of AI-enabled smartphones is poised to play a pivotal role in Qualcomm’s revival. IDC, a market research firm, predicts that the shipment of 170 million AI-enabled smartphones could transpire this year, surpassing last year’s 51 million units. Noteworthy is IDC’s observation that AI smartphones are anticipated to represent 15% of the overall smartphone market this year, signifying substantial growth potential moving forward.
The AI smartphone segment is forecasted to exhibit an impressive annual growth rate of 83% between 2024 and 2027. Qualcomm is well-positioned to harness the opportunities within this sector, as it provides processors to leading smartphone OEMs (original…
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