We recently compiled a list of the 10 Best Augmented Reality Stocks To Buy Now. In this article, we are going to take a look at where QUALCOMM Incorporated (NASDAQ:QCOM) stands against the other augmented reality stocks.
Augmented reality (AR) is a technology that enhances our perception of the real world by overlaying digital elements through devices, adding to your existing environment. There are various ways to describe AR, from spatial computing to holographic projection, but its practical applications define its true value. A notable example of an AR device is the HoloLens, a holographic computer that enables users to interact with digital content within the real world, leading to its growing adoption across various industries such as education, manufacturing, and healthcare.
AR/VR Startups
Despite its applications and prospective growth, the AR space seems to have lost favor with venture capitalists, with investments declining due to disappointing adoption rates for the gear and leading metaverse platforms. Even the launch of the Vision Pro headset earlier this year, promoted as a "spatial computing" device, didn't significantly shift the mood. Reports suggest that demand for the $3,500 device is cooling, prompting the maker to lower its shipment forecast.
Similarly, the investment climate in the startup sector remains cold, with only about $464 million invested this year in seed through growth-stage funding for AR, VR, and metaverse-related companies. This sets 2024 on course to reach the lowest funding total in years. Most startups that raised large financings during the peak in 2021 haven't secured new rounds since. However, despite the slowdown, some notable deals have still occurred, with the largest AR-related round this year going to Rokid, a maker of augmented reality glasses, which raised $70 million in January. Another notable investment was in Beijing-based Xreal, a mixed-reality glasses maker that positions itself as a more affordable alternative to the Quest and Vision Pro, which raised $60 million in January at a $1 billion valuation.
Most notably, Google recently partnered with augmented reality startup Magic Leap in a strategic technology deal, hinting that the tech giant may be preparing to re-enter the AR and VR market, a space it has mostly left to rivals. Over a decade ago, the search engine giant was a trailblazer in AR. This enthusiasm peaked during a 2012 demo where skydivers used the glasses to live stream a jump onto a building in San Francisco. However, the product faced significant consumer pushback due to its awkward design and privacy concerns.
Augmented Reality Market & Outlook
The global augmented reality market, valued at $32.1 billion in 2022, is projected to grow from $42.85 billion in 2023 to $432.35 billion by 2031, with a compound annual growth rate (CAGR) of 33.5% over the forecast period, according to industry data from SkyQuest.
A significant portion of the market is mobile AR, leveraging the widespread ownership of smartphones, tablets, and other mobile devices. As of this year, it's projected that there will be 1.7 billion devices capable of supporting mobile AR. Notably, a key advantage mobile AR enjoys is the massive existing smartphone user base. Unlike the steep challenges AR glasses face, mobile AR benefits from "zero-cost" hardware, making its path to adoption relatively smoother. Growth is expected across both enterprise and consumer segments, including digital AR experiences. A well-known example is the 2016 video game Pokémon GO, where players explore their surroundings to find virtual characters on their phones. Additionally, collaborations between key market players and 5G providers to address latency issues are expected to fuel market growth.
Our Methodology
In this article, we reviewed online rankings and ETFs to determine 20 companies operating in the AR space. We then selected the 10 stocks that were the most popular among elite hedge funds. We sourced the hedge fund data from Insider Monkey's database of 912 hedge funds, as of Q2 2024. Our focus was on companies that produce AR-related hardware, software, or technologies used in developing augmented reality products. However, we also included companies that offer services essential to the AR industry, like semiconductor chips.
At Insider Monkey we are obsessed with the stocks that hedge funds pile into. The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
A technician testing the latest 5G device, demonstrating the company's commitment to innovation.
QUALCOMM Incorporated (NASDAQ:QCOM) is a leading American telecom equipment and semiconductor company based in California. The company operates across various high-growth markets, including smartphones and autonomous vehicles, supplying chips to major companies like Samsung, Huawei, and BMW. QUALCOMM's Snapdragon augmented reality technology is a key player in powering extended reality, augmented reality, virtual reality, and immersive experiences.
Additionally, QUALCOMM Incorporated (NASDAQ:QCOM)'s handset business remains robust, driven by the strong performance of its third-generation Snapdragon platforms designed for high-end smartphones. Revenues from Chinese OEMs surged by over 40% in the first half of fiscal 2024, indicating strong demand beyond major customers.
JPMorgan Chase & Co. recently updated its outlook on QCOM, raising its price target to $235 from $185 and maintaining an Overweight rating on the stock. The forecast anticipates low double-digit revenue growth in handsets (excluding Apple), an approximately 30% compound annual growth rate (CAGR) in the automotive sector, and over 26% CAGR in the Internet of Things (IoT) sector. Additionally, PC-related revenue is expected to grow from $300 million in FY24E to $3.7 billion in FY27E.
As of the second quarter, 100 hedge funds held positions in the company, with stakes totaling $8.82 billion. Matrix Capital Management is the largest shareholder as of the quarter, with a position valued at $1.99 billion.
O’keefe Stevens Advisory stated the following regarding QUALCOMM Incorporated (NASDAQ:QCOM) in its Q2 2024 investor letter:
“During the quarter, the A.I. rally broadened beyond the obvious players of Nvidia, AMD, and hyperscalers. QUALCOMM Incorporated (NASDAQ:QCOM), a long-standing investment, is gaining recognition for integrating artificial intelligence into mobile phones. Qualcomm’s A.I. on-device capabilities enable real-time language translation, improved voice recognition, and sophisticated imaging techniques as A.I. becomes more integral to mobile experiences. Qualcomm benefits by leading the market in providing robust, efficient, and versatile A.I. solutions. A.I. could be the first technology advancement in several years to accelerate the smartphone replacement cycle as users desire these advanced capabilities.”
Overall QCOM ranks 7th on our list of the best augmented reality stocks to buy. While we acknowledge the potential of QCOM as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than QCOM but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
