Nvidia's (NVDA 3.71%) stock price skyrocketed 1,750% over the past five years, turning it into the world's most valuable chipmaker, with a market cap of $1.8 trillion. That historic rally -- which was driven by soaring sales of data center GPUs for processing artificial intelligence (AI) tasks -- left Nvidia's semiconductor rivals in the dust.
One of those rivals was Qualcomm (QCOM -0.20%), which was more valuable than Nvidia nearly five years ago. Back in May 2019, Qualcomm had a market cap of $104 billion, while Nvidia was worth $103 billion. But today, Qualcomm is only worth $174 billion, making it less than a 10th as valuable as Nvidia.
Image source: Getty Images.
Qualcomm, which drove Nvidia out of the mobile chipmaking market in 2014, is still heavily dependent on the cyclical sales of smartphones. Meanwhile, Nvidia expanded beyond its core gaming GPU business and ramped up its sales of higher-end GPUs for data centers. That forward-thinking strategy enabled it to capitalize on the rapid growth of the AI market, which kicked into high gear as generative AI platforms like OpenAI's ChatGPT gained more users.
Could Qualcomm stage a fierce comeback over the next few years and become an exciting growth stock like Nvidia again? Or will it become a slower-growth chipmaker like Texas Instruments, the type of investment that's owned for stability and income instead?
Understanding Qualcomm's business
Qualcomm produces mobile system on chips (SoCs), which bundle together CPUs and GPUs for smartphones, tablets, and other mobile devices. It also sells stand-alone baseband modems to smartphone makers like Apple (AAPL 0.52%) that don't use its mobile SoCs. Like Nvidia, Qualcomm is a fabless chipmaker that outsources its production to third-party foundries.
Qualcomm was once the world's top mobile SoC maker, but it lost its crown to Taiwan's MediaTek over the past three years. Major smartphone makers like Apple, Samsung, and Huawei have also been developing their own first-party mobile SoCs.
Those threats, along with the cyclical nature of the smartphone market, drove Qualcomm to develop more chips for the automotive and Internet of Things (IoT) markets. In fiscal 2023 (which ended last September), it generated 85% of its revenue from its chipmaking division -- but handset chips still accounted for 74% of that total.
The remaining 15% of its revenue came from its licensing division, which leverages its wireless patents to take a cut of every smartphone sold worldwide -- even if they don't use Qualcomm's chips. This business operates at much higher margins than its chipmaking segment, but it's been repeatedly challenged by handset makers and government regulators claiming its royalties and licensing fees are too high.
Will Qualcomm overcome is current slowdown?
Qualcomm's revenue only rose 12% in fiscal 2020 as the pandemic disrupted the semiconductor sector, but surged 55% in fiscal 2021 and 32% in fiscal 2022 as those headwinds dissipated and new 5G handsets hit the market.
But in fiscal 2023, Qualcomm's revenue fell 19% due to the 5G upgrade cycle ending, macro headwinds throttling sales of new handsets (especially in China), and continuing struggles against MediaTek in the low-to-mid-range market. Its sales of industrial IoT chips also declined as the macro environment drove companies to rein in their spending. Its double-digit growth in automotive chip sales failed to offset all of that pressure.
Analysts expect Qualcomm's revenue to rise 6% in fiscal 2024 and 8% in fiscal 2025 as the smartphone market gradually recovers, it ramps up its sales of IoT and automotive chips, and the macro picture improves. But looking further ahead, Apple -- which accounted for more than 10% of Qualcomm's revenue in fiscal 2023 -- could eventually replace the chipmaker's baseband modems with its own first-party modems after 2026.
Qualcomm's loss of Apple -- along with pressure from competition, the commoditization of the smartphone market, and the slow expansion of its IoT and automotive chipmaking businesses -- will likely cause it to expand at a much slower pace than Nvidia for the foreseeable future. On the bright side, analysts expect Qualcomm's EPS to rise at a compound annual growth rate (CAGR) of 14% from fiscal 2023 to fiscal 2026 as it continues to streamline its spending and repurchase more shares.
Qualcomm probably won't become the next Nvidia
Qualcomm's stock looks cheap at 16 times forward earnings and pays an attractive forward yield of 2.1%. However, it will probably remain a slower-growth semiconductor play like Texas Instruments instead of a higher-growth one like Nvidia. Qualcomm is still a decent long-term investment, but its persistent challenges and a lack of clear catalysts will likely prevent it from becoming a trillion-dollar semiconductor stock like Nvidia.
Leo Sun has positions in Apple and Qualcomm. The Motley Fool has positions in and recommends Apple, Nvidia, Qualcomm, and Texas Instruments. The Motley Fool has a disclosure policy.
FAQs
Qualcomm probably won't become the next Nvidia
Can Qualcomm be next in Nvidia? ›
Qualcomm is uniquely positioned in one key niche segment of the market to take advantage of these trends. While the company may be getting lost in the fray relative to other high-growth chip makers such as Nvidia (NASDAQ:NVDA), I think this is a stock investors may want to focus on in the coming quarters.
Does Motley Fool recommend Qualcomm? ›
What's Going on With Qualcomm Stock? Qualcomm was recently upgraded to my list of AI stocks to buy.
Does Motley Fool recommend Nvidia? ›
The Motley Fool has positions in and recommends Advanced Micro Devices and Nvidia.
What is going to be the next Nvidia stock? ›
Enjoy an early-mover advantage with the next Nvidia stocks. Palantir Technologies (PLTR): Having reported impressive results, Palantir is on a roll. Taiwan Semiconductor (TSM): The largest chipmaker will continue to grow as the AI industry expands. Advanced Micro Devices (AMD): Wall Street is bullish on AMD stock.
Can QCOM compete with Nvidia? ›
Qualcomm probably won't become the next Nvidia
Qualcomm is still a decent long-term investment, but its persistent challenges and a lack of clear catalysts will likely prevent it from becoming a trillion-dollar semiconductor stock like Nvidia.
How high can Qualcomm stock go? ›
QCOM Stock 12 Month Forecast
Based on 29 Wall Street analysts offering 12 month price targets for Qualcomm in the last 3 months. The average price target is $205.60 with a high forecast of $270.00 and a low forecast of $140.00.
What will Qualcomm be worth in 5 years? ›
Qualcomm stock price stood at $166.94
According to the latest long-term forecast, Qualcomm price will hit $250 by the end of 2025 and then $350 by the end of 2026. Qualcomm will rise to $400 within the year of 2027, $450 in 2028, $500 in 2029, $600 in 2032 and $700 in 2035.
Who owns most of Qualcomm stock? ›
Largest shareholders include Vanguard Group Inc, BlackRock Inc., State Street Corp, VTSMX - Vanguard Total Stock Market Index Fund Investor Shares, VFINX - Vanguard 500 Index Fund Investor Shares, Price T Rowe Associates Inc /md/, Geode Capital Management, Llc, Morgan Stanley, Invesco Qqq Trust, Series 1, and ...
Is QCOM a good long-term investment? ›
QCOM has a Momentum Style Score of A, and shares are up 24.3% over the past four weeks. For fiscal 2024, 10 analysts revised their earnings estimate upwards in the last 60 days, and the Zacks Consensus Estimate has increased $0.30 to $9.87 per share. QCOM boasts an average earnings surprise of 7.5%.
The top individual shareholders of Nvidia are Jen-Hsun ("Jensen") Huang, Tench Coxe, and Mark A. Stevens, and the top institutional shareholders are Vanguard Group Inc., BlackRock Inc. (BLK), and FMR LLC.
Is Nvidia a millionaire maker stock? ›
Thanks to Nvidia's (NASDAQ:NVDA) astronomical rise this year, high-potential stocks are on everyone's minds. NVIDIA's stock outperformed the S&P 500 with a 166.1% gain in the last year, compared to 26.4%. NVIDIA stock is up 149.51% in 2024.
Is NVDA still a buy? ›
Four analysts have reiterated buy ratings for Nvidia since its shares began to retreat on July 10, 2024, according to LSEG. And they're even more optimistic about the stock than before Nvidia's pullback started.
Could Nvidia top $1000 a share in 2026? ›
Nvidia stock — after splitting 10-for-1 early in June — could rise from $100 to $1,000 by 2026. This optimistic scenario assumes Nvidia keeps beating growth expectations and raising its forecasts — resulting in a 248% annual increase in the company's stock price over the next two years.
Could Palantir be the next Nvidia? ›
Nvidia is growing at a much faster pace than Palantir right now. Though Nvidia stock has a more expensive valuation, investors would do well to look at the bigger picture. Palantir Technologies could be a big AI winner in the long run thanks to increasing software investments.
What will Nvidia stock be worth in 10 years? ›
We believe Nvidia will reach a $10 trillion market cap by 2030 or sooner through a rapid product road map, it's impenetrable moat from the CUDA software platform, and due to being an AI systems company that provides components well beyond GPUs, including networking and software platforms.
What will be the next Nvidia card? ›
According to the report, Nvidia is getting ready to launch the RTX 5090 first in the final quarter of 2024, followed by the RTX 5080 a few weeks later. This mirrors the approach in the RTX 40-series, where the RTX 4090 hit the shelves first, followed by the RTX 4080 shortly after.
What is the future prediction for Qualcomm? ›
QUALCOMM Stock Forecast
The 24 analysts with 12-month price forecasts for QUALCOMM stock have an average target of 199.79, with a low estimate of 125 and a high estimate of 270. The average target predicts an increase of 19.68% from the current stock price of 166.94.
Where will Qualcomm stock be in 5 years? ›
Qualcomm stock price stood at $180.05
According to the latest long-term forecast, Qualcomm price will hit $200 by the end of 2024 and then $300 by the end of 2025. Qualcomm will rise to $400 within the year of 2026, $450 in 2027, $500 in 2028, $600 in 2030, $700 in 2032 and $800 in 2035.
Which is bigger Nvidia or Qualcomm? ›
Nvidia overtakes Qualcomm to become the biggest chip designer by revenue, which should give Jensen plenty to smile about. NVDA.
