Is it FINALLY Time to Buy Qualcomm Stock?! 😲

Hey, welcome back subscribers. We've got another episode of Ask Ali today from the video requests and suggestions tab in our community discord. By the way, if you ever want to request a video yourself, you can access our discord by supporting me on Patreon. Link is in the description. And I do also just want to quickly apologize to Ian R for taking so long on that other request that he left for me. I do want to make that video for you soon, but this other request from Space Tom is just a little more pressing at the moment. So, I wanted to make a video on this one really quick. But, here he asks, "Ali, what do you think of Qualcomm? They just reported earnings and the stock fell even more. I really like them as an alternative pick to other chip stocks like Nvidia, AMD, or Intel. And I would love to hear your perspective if you are willing to share. Thank you." Okay, no problem, Tom. And yeah, we can definitely make this video for you here. So, what is going on with Qualcomm stock? Well, pulling up the chart here, we can see that it just fell over 14% this past week, over 20% in the past month. And that's now leaving it down about half its entire value from the very top. So, why all of the crashing here? Well, first off, earnings were pretty bad. They just reported this week and although they did technically beat analyst projections on both the top and bottom line, those figures were still negative declines year-over-year. So, basically, Qualcomm, the maker of all these you know, popular like Snapdragon chips that are probably powering your own phone, I know it's powering mine. And of course, they make many other chips and components, too. But, they're going through really, I would say, a very challenging period right now where the price of memory and other component costs are just kind of like soaring through the roof, including wafer fabrication, testing, and packaging, too. All because of direct inflation in that sector. And to make matters worse, well, Qualcomm specifically is facing a timing lag for their own business, too, where their input costs went up immediately, but their own price increases aren't actually scheduled to take effect until September. So, there's a bit of a lag there. And because smartphones are getting, you know, just kind of so crazy expensive to build, well, consumers are also opting for lower-end models and even older ones, too, instead of upgrading to the latest flagships that carry, you know, such high price tags. And well, well, the issue for Qualcomm is that those cheaper devices run on lower-margin chips, which caused Qualcomm's core handset chip sales to actually crash by a giant 20% decline year-over-year. And if that wasn't bad enough uh news for their smartphone division, well, QC has also been dealing with major supply constraints, which ended up accelerating Apple's own move away from Qualcomm for their um in-phone modems, which will now be sitting at just less than 20% of Apple's upcoming lineup this year. And that's a huge drop that Wall Street wasn't uh really expecting to happen so soon. Well, because of it, uh Wall Street clearly took a look at that struggling handset business, and they chose to hit the sell button on the stock. Which, you know, I can understand. However, my personal opinion on this is that we are probably near the floor of that weaker demand at this point. And one of the things that I think the market might actually be overlooking, too, when it comes to Qualcomm, is that that they've actually been doing a pretty good job of diversifying their business away from just relying so heavily on smartphones alone. In fact, their automotive sales actually jumped a monstrous 61% to about to about a 1.6 billion in the quarter, while their Internet of Things segment grew by 9%, too. Uh pretty soon, I think we'll see those two combined segments account for about half of Qualcomm's entire business, especially since automotive has now seen a staggering 23 consecutive quarters of double-digit growth in a row. Looking further out, they also have an enormous $65 billion backlog for their auto chips alone. That's a That's huge amount of money to have on order for those auto chips. And just recently they expanded their collaboration with Stellantis to adopt the Snapdragon smart car platform across their entire next-gen vehicle lineup, combining the dashboard connectivity and driver assistance tech all into one. And just as big of a win, BMW just named Qualcomm their lead chips provider too for their future in digital cockpits and autonomous driving. And then you have the Internet of Things and wearables, where the CEO recently stated that they're now working on more than 40 different designs for new AI-powered devices. I even Meta's own new intelligent smart glasses are actually powered by the Snapdragon platform. And to capture even more of this market, well, QC just launched something called Snapdragon Start. I actually think this is going to be huge. It It's like a ready-made highly scalable hardware module that only costs as little as $40. And it allows almost any eyewear brand to turn standard glasses into agents-ready personal AI devices. It's pretty cool stuff, pretty cool tech, and it's actually pretty affordable. And so, you know, with over like 600 million wearable glasses being shipped annually, if Qualcomm grabs even just a fraction of that market with this new add-on, yeah, that could be a giant new revenue stream for them that could really help diversify help them diversify even further. In other words, QC isn't just sitting around waiting for like the apple fall off to crush their business, which a lot of the bears, you know, always kind of argue about. Um they're actively innovating on new products that altogether could help replace the lost Apple sales entirely. In fact, management now projects that their total non-handset revenue will hit 40 billion by 2029 with related sales rising by over 60% next year alone. And even better than all of this, what I would actually um be the most excited for if I was invested in the stock, isn't how the company is aggressively pushing into the AI data center market now, too. Having recently launched their new Dragonfly platform that offers much more efficient chips with still very strong performance. And if there's one thing that we know about AI right now, it's that every company out there is really trying to figure out a way to lower their energy consumption while still being able to offer high-performance AI compute. Well, QC's new technology seems to be so efficient that they've already landed major supply deals with both Meta and even Microsoft. And management expects to generate a whopping 15 billion dollars in annual revenue from just this data center business alone by 2029. Helping push the company to a giant total target of 100 billion annually by that same year. Now, for context, QC only did about 44 billion in total sales all of last year. So, hitting 100 billion would be, you know, more than double the size for the entire company in just a few years' time. That's a pretty big deal. And to make sure all this new hardware has the right software to back it up, too, well, Qualcomm actually decided to buy out Modular, who builds um AI platforms that can take heavy models from the cloud and actually run them smoothly on much weaker devices like, you know, everything from smartphones to even smart cars. In fact, Qualcomm has been on such a roll here that um they even caught the attention of Nvidia's own CEO, Jensen Huang, who directly complimented Qualcomm's work in on-device AI and even said that the reason Nvidia doesn't bother with smartphones themselves is because Qualcomm is already doing such a great job. Now, that's pretty interesting when the CEO of a multi-trillion-dollar competitor praises you like that, it's usually a great sign. Uh but again, because the market is just so laser-focused on the current headwinds, they're punishing the stock to the point where it now trades around 30 to even 60% cheaper than the sector median on a forward P basis, which is a pretty low level to be at for a leader like this. And QC seems to think so, too, as they've been aggressively buying back their own stock, having already purchased over $5 billion worth in the first half of this year, uh while announcing recently a brand new $20 billion share repurchase program, too. And while investors wait for that turnaround to take shape, they also get to collect a small but growing dividend that now yields close to 2 and 1/2% with a low payout ratio and over two decades of consecutive growth. As for me, though, while I am super tempted to buy the dip here, I just worry that I already own way too many AI and semiconductor stocks as it is in my portfolio. I agree with Tom, though, that this could be a great alternative option if that's, you know, specifically what you're looking for apart from just owning like Nvidia, AMD, Intel, all those other types of stocks out there. There's so many, you know, so many chip stocks out there to own. Um but yeah, um I don't have any issues with having this one, too, or having this one as an alternative player or as a backup player. Other ways you can look at it, but, you know, I think long-term there is some very real rebound potential here with Qualcomm. Um that could definitely be worth taking a chance on. In fact, as I was researching this video, um I honestly kept kind of convincing myself more and more that more and more that it is a buy here at these levels, and uh to To honest, I wouldn't be surprised at all if I just like wake up one of these days and I end up buying some shares on impulse. Um especially if it gets dragged down even further than it already is. But yeah, that's um mostly how I feel about it at present time and I'm just kind of holding off at the moment. But you know, if it continues to fall like this, I I I might want to take a chance on it myself, too. So Anyway, those are my thoughts. I hope you enjoyed the video. Um thanks for the video request. I hope you enjoyed it, too, there, Space Home. And um yeah, like I said, if any of you guys want to join us in the Discord, you can sign up on Patreon. It's only five bucks a month. You get access to our community Discord. You get early videos. You get commercial-free videos. You get other cool perks, too. You get my daily stock trades where I post a new stock purchase every single day. So you get tons of stuff only for just five bucks a month. So I'd love to have you on there, too. Please consider supporting me with that. It really helps out the channel a lot. And um yeah, either way, I just hope you enjoyed the video. Leave your thoughts and comments down below. Got more videos coming for you soon. So I'll catch you guys in the next one. All right. Take care, my friends. Bye-bye.