Following a weak 2023 for smartphone shipments, the market is showing signs of a rebound, supported by demand for premium handsets and the integration of generative AI. Qualcomm is poised to be a beneficiary of this rebound. The chipmaker’s Q2 earnings on Wednesday should give investors a better idea of whether the market has bottomed out.
Qualcomm [QCOM] announced the Snapdragon 8s Gen 3 Mobile Platform in March. It’s designed to bring features of its flagship chip, including support for generative artificial intelligence (AI) models, to more affordable phones.
“Snapdragon 8s Gen 3 is designed to enhance user experiences, fostering creativity and productivity in their daily lives,” said Chris Patrick, Senior Vice President and General Manager of Mobile Handsets at Qualcomm, in a press release. The platform will bring premium services to more consumers, he added.
According to Stockcircle, four ‘super investors’ bought $32.4m worth of Qualcomm shares in Q4 2023, but nine sold a combined $228.3m.
Sellers included Ken Griffin, Founder, CEO and Co-Chief Investment Officer of Citadel, who cut his stake by 26.2%, offloading approximately 326,000 shares, and Ken Fisher, Founder, Executive Chairman and Co-chief Investment Officer of Fisher Investments, who reduced his holding by 1.7%, selling approximately 29,700 shares.
At the time of writing, the only super investor who had disclosed purchases or sales of Qualcomm in Q1 was Cathie Wood. The Founder, CEO and Chief Investment Officer of ARK Invest started a new position, having last held the stock in Q1 2018. Wood purchased approximately 132,000 shares.
Q1 Smartphone Shipments Show Signs of a Rebound
The reason for the super investor sells outweighing the buys in the last three months of 2023 could be the fact that Qualcomm endured a tough year, due to challenges facing smartphone chip shipments. However, the company’s Q1 2024 earnings indicated that things could be on the up.
For the three months to end of December, Qualcomm reported revenue of $9.94bn, up 5% year-over-year, on earnings per share of $2.46, up 24% year-over-year.
The chipmaker shipped $6.69bn worth of smartphone handset chips during the quarter. This was a 16% jump from the final three months of 2022, a sign that “the android smartphone market is stabilising”, Qualcomm CEO Cristiano Amon said on the earnings call at the end of January.
Amon is confident that generative AI applications, powered by its Snapdragon chips, will play a big role in driving demand for android smartphones in the near future.
“We’re starting to see as early as 2024 some very interesting use cases, even with flagship [smartphones] … That could create a new upgrade cycle for phones, and that will, by definition, just increase the phone market,” Amon said.
Counterpoint Research foresees a “modest rebound” in smartphone shipments this year. The premium segment, where Qualcomm is strongest, is forecast to grow at 17% year-over-year, driven by excitement around AI features.
Q2 China Sales in Focus
For Q2 2024, Qualcomm has forecast revenue of between $8.9bn and $9.7bn on earnings per share of between $1.73 and $1.93.
Investors are likely to pay close attention to any figures and commentary regarding China when the chipmaker reports earnings on Wednesday. China is its biggest market, accounting for 62.5% of Qualcomm’s total 2023 revenue, according to Statista.
Sales to Chinese smartphone makers — customers include Huawei and Xiaomi [1810.HK] — jumped 35% in the final three months of 2023 from the previous quarter. However, speaking to Yahoo Finance at the Consumer Electronics Show in Las Vegas back in January, Amon cautioned that any restrictions in the future would likely dent sales.
“So far, many of the policies have not yet restricted the ability to continue to do business in phones, in PCs, and cars, and we want that to continue,” said Amon.
Qualcomm Rallies on AI Smartphone Demand
The Qualcomm share price is up 49.2% in the past year through 29 April and has rallied 15.1% year-to-date. The stock is well-placed to keep on rising as the market for smartphones with AI functions and capabilities continues to grow.
Other than buying Qualcomm shares directly, another way to gain exposure to the stock is through thematic ETFs.
The Global X Artificial Intelligence & Technology ETF [AIQ] has Qualcomm as its eighth-biggest holding, with a weighting of 3.2% as of 26 April. The fund is up 38.2% in the past year and up 4.7% year-to-date.
The ROBO Global Artificial Intelligence ETF [THNQ] has allocated 1.8% of its portfolio to Qualcomm. The fund is up 39.2% in the past year and up 2.7% year-to-date.
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