Mobile phones and PCs enter the "AI era", is it Qualcomm's "golden period" coming?

Author: Li Xiaoyin

Source: Hard AI

As AI gradually enters the field of mobile devices, Qualcomm may have found a new growth point.

After the US stock market closed on May 2nd, chip giant Qualcomm announced its Q2 2024 financial report, causing its stock price to rise by nearly 10%. So far this year, Qualcomm's stock price has accumulated a nearly 30% increase.

On the news front, Qualcomm's second-quarter report shows that the company's chip sales business performed well, supported by the sales of Android smartphones with AI capabilities.

Taking the Samsung Galaxy S24 as an example, its AI functions such as real-time translation and image-based web search have received positive market responses. According to Counterpoint Research data, the sales of the Samsung S24 in the first three weeks after its launch increased by 8% compared to the previous generation of the Galaxy series.

In addition, Apple CEO Cook emphasized the company's interest in generative AI in the latest earnings call and mentioned that they will soon launch "exciting" AI features and products, sparking investor interest in AI smartphones and to some extent boosting Qualcomm's stock price.

Ben Reitzes from Melius Research stated in a report to clients:

"The AI-driven iPhone super cycle may arrive in 2025."

Will Qualcomm Enter a "Golden Period"?

Some believe that if Apple introduces an AI-supported iPhone, it will further drive the market's demand for AI integration in mobile devices, presenting a huge opportunity for Qualcomm.

Analysts point out that to support demanding AI algorithms in smartphones, the key is whether the corresponding components can save power while ensuring close collaboration - which is precisely Qualcomm's strength.

TD Cowen analyst Matt Ramsay said:

"Adding AI to phones will consume more power in computing and memory."

"If you want the battery life to remain the same, where do you get the power budget from? Modem, RF, and screen."

In other words, integrating AI into phones requires tighter integration of modem/RF to ensure battery life. Qualcomm has long had professional advantages in wireless components.

Furthermore, Qualcomm has always dominated the modem chip market, and its Snapdragon processor is the main computing chip for many Android phones, giving the company a scale advantage in this field.

UBS analyst Tim Arcuri stated in a report to clients:

"Apple has not been able to develop its own modem, and over time, Qualcomm's influence is expected to grow." In September last year, Qualcomm announced that it had reached an agreement with Apple to continue providing Snapdragon 5G modems and RF systems for Apple's smartphones in 2024, 2025, and 2026.

In addition, Qualcomm is also entering the AI PC race. It is reported that the Microsoft Build developer conference, to be held from May 21st to 23rd, will introduce AI laptops powered by Qualcomm Snapdragon processors.

Currently, Qualcomm's stock price has not been pushed to unreasonable levels due to AI speculation. According to FactSet data, the forward price-to-earnings ratio of the stock's closing price on Friday is about 17 times, a 39% discount from the near ten-year high forward price-to-earnings ratio of 28.3 times for the PHLX Semiconductor Index