Why QUALCOMM Incorporated (QCOM) Is Among the Best Semiconductor Stocks to Buy for the AI Boom

Maxim G.

Wed, Jan 22, 2025, 1:53 PM 4 min read

More than two years have passed since the proliferation of the disruptive Artificial Intelligence (AI) megatrend, symbolically marked by the launch of OpenAI’s revolutionary product – ChatGPT. Since then, the AI revolution has accelerated rapidly, with 2023 and 2024 seeing a surge in demand for advanced AI applications across industries. This transformation has driven companies to increasingly rely on robust data centers that can support the computational power required by the intelligent algorithms.

In tandem with the rise of AI, the data center sector has experienced substantial growth. The need for larger, more efficient, and scalable data storage and processing capabilities has created a boom in infrastructure investments. Data centers, which house the powerful servers needed for AI workloads, have become critical enablers of this technology's expansion. This increase in demand for data center capacity is a key factor that has propelled semiconductor stocks, as these centers rely heavily on cutting-edge semiconductors to deliver the speed, efficiency, and power necessary to process vast amounts of data in real time.

Our Methodology

We shortlisted 35 semiconductor stocks using the holdings of iShares' Semiconductor ETF. Then we merged these stocks with Insider Monkey's proprietary hedge fund holdings database and identified the 10 most popular hedge fund semiconductor stocks. Why are we interested in 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).

Is QUALCOMM Incorporated (QCOM) The Best NASDAQ Dividend Stock To Buy?

A technician testing the latest 5G device, demonstrating the company's commitment to innovation.

QUALCOMM Incorporated (NASDAQ:QCOM)

Number of Hedge Fund Holders: 74

QUALCOMM, Inc. (NASDAQ:QCOM) develops and licenses wireless technologies while designing chips for smartphones, making it a key player in the industry. With foundational patents in CDMA and OFDMA technologies powering 3G, 4G, and 5G networks, QCOM licenses its IP to nearly all wireless device makers and is the largest global supplier of wireless chips, providing advanced processors to top handset brands. The company also offers RF front-end modules for smartphones and supplies chips to automotive and IoT markets.

QCOM stock is up +16% in the last years and shows solid momentum as the company works on diversifying its business beyond smartphones, targeting $22 billion in revenue from adjacencies over the next 5 years. The automotive sector is a major growth opportunity as well, with the company seeing strong traction in digital cockpit solutions incorporating AI capabilities and expecting ADAS revenue to start materializing in the coming years. In the PC market, QCOM is gaining traction from the shift to AI PCs and projects $4 billion in revenue by 2029, while in smartphones, the focus is centered on premium and high-tier devices, seeing a 10% CAGR fueled by more computing and AI content.

QUALCOMM, Inc. (NASDAQ:QCOM) management commented on their accelerating markets during the UBS Global Technology and AI Conference. Here is what they said:

“I think we see GenAI as a very good accelerant of that opportunity, especially content. I am optimistic about the PC, looking at the landscape right now from the competitive environment we have built. I think we're well positioned. I think one of the things I said in the earnings call, and I said that design traction is very good. We started with 20 platforms in May. We have 58 designs now by -- in November, line of sight to about 100 designs as we get to early 2026. So, I'm excited about that. One thing that we think is very novel is what we're doing of industrial, which is the same exact thing we did automotive, which is let's not thinking about building a connected microcontroller for auto.

Overall QCOM ranks 7th on our list of the best semiconductor stocks to buy for the AI boom. 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.

Disclosure: None. This article is originally published at Insider Monkey.

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