QUALCOMM Incorporated

(NASDAQ Global Select)
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Slightly Bearish -15

Qualcomm stock gets harsh reality check after semiconductor rally

AI-generated analysis

πŸ“‰ Qualcomm shares plunged more than 17% over two days in mid-May as broader semiconductor sentiment turned risk-off following inflation fears and geopolitical tensions.

πŸ’» The stock had previously surged 15.12% on April 30 after reporting fiscal second-quarter results that exceeded guidance but showed declining revenue and earnings.

πŸ“Š Financials for the quarter showed non-GAAP revenue of $10.6 billion, down 2% year over year, and non-GAAP earnings per share of $2.65, down 7%.

πŸš€ CEO Cristiano Amon highlighted the company's expansion into custom AI chips for data centers, with initial shipments expected in the December quarter.

⚠️ Analyst Chris Versace removed Qualcomm from his bull-stock watchlist due to concerns about the declining relationship with Apple and questions over manufacturing capacity.

πŸ“± Qualcomm management confirmed that only 20% of Apple smartphones will use Qualcomm chips this year, a figure expected to drop to zero next year.

πŸ€– Apple currently accounts for an estimated 22% to 27% of Qualcomm's total revenue in 2025, raising fears about the impact of losing this major customer.

⚑ Capacity concerns were raised regarding AI and data center chips as competitors like Nvidia, AMD, and Broadcom secure capacity from foundries like TSMC.

πŸ“ˆ Analysts worry if Qualcomm can offset its expected Apple revenue decline, fiscal 2027 revenue may fall short of the Wall Street consensus of $42.54 billion.

🎯 Current earnings-per-share expectations for this year and next remain below the levels Qualcomm actually delivered in 2025.

πŸ”„ Investors are rotating out of high-growth technology names amid fears that hotter-than-expected inflation data might persist.

πŸ—οΈ The company plans to share more details about its data center strategy during its Investor Day scheduled for June 24.

πŸ“ˆ Qualcomm stock is up approximately 17% year-to-date despite the recent sharp pullback in mid-May trading sessions.

πŸ’Ό The selloff reflects a broader theme where Wall Street focuses on processors and custom silicon beyond traditional graphics processing units.

⚑ Investors are questioning whether Qualcomm can secure enough fabrication capacity for its ambitious AI chip plans given intense competition.

πŸ“‰ The recent drop in shares highlights the volatility of semiconductor stocks when macroeconomic headwinds coincide with company-specific risks.

Bullish Signals
  • Qualcomm's stock surged 15.12% on April 30 following the announcement of its expansion into custom AI chips and data centers.
  • Management highlighted that a leading hyperscaler custom silicon engagement is on track for initial shipments later this calendar year.
  • The company plans to share more details about its growth initiatives during its Investor Day on June 24.
  • Qualcomm has generated strong momentum year-to-date, with shares up roughly 17% despite recent market corrections.
  • Management reaffirmed that the fiscal second-quarter results were in line with guidance, demonstrating execution capability.
Risk Factors
  • Qualcomm shares plunged more than 11% on May 12 and another 6% on May 14 due to broader risk-off sentiment in the semiconductor sector.
  • Non-GAAP revenue for the fiscal second quarter came in at $10.6 billion, representing a 2% year-over-year decline.
  • Non-GAAP earnings per share dropped by 7% to $2.65 during the fiscal second-quarter reporting period.
  • Qualcomm expects Apple's smartphone business contribution to fall from 22% to 27% of total revenue in 2025 to zero in the following year.
  • Only 20% of Apple smartphones will include Qualcomm chips this year, raising concerns about a significant future loss of market share.
  • There is uncertainty over whether Qualcomm can secure sufficient manufacturing capacity from TSMC and other foundries to support its growth plans for AI and data center chips amidst competition from Nvidia and AMD.
  • Wall Street consensus estimates fiscal 2027 revenue at $42.54 billion, creating pressure on management to offset the anticipated Apple-related decline.
  • Earnings-per-share expectations for this year and next remain below the level Qualcomm actually delivered in 2025.
Full Analysis
Qualcomm stock (QCOM) has experienced a significant pullback, dropping more than 17% from its recent peak following a massive post-earnings rally. On May 12 and May 14, shares plunged over 6%, with a notable decline on May 12 where they fell more than 11%. This selloff occurred amidst a broader risk-off sentiment in the semiconductor sector triggered by hotter-than-expected inflation data and rising geopolitical tensions, including concerns over the war in Iran pushing oil prices higher. Investors subsequently rotated out of high-growth technology names, causing the chip maker's stock to correct after a surge of 15.12% on April 30 following its fiscal second-quarter results. In its earnings report released on April 29, Qualcomm reported non-GAAP revenue of $10.6 billion, which represented a 2% year-over-year decline, while non-GAAP earnings per share were $2.65, down 7%. Although management stated the results aligned with guidance and emphasized new expansion into custom AI chips for data centers, investors remain cautious about the company's long-term growth trajectory. CEO Cristiano Amon noted that a leading hyperscaler custom silicon engagement is on track for initial shipments later this calendar year, but he also indicated that further details would be shared during the upcoming Investor Day on June 24. Despite the optimism around new AI and data center opportunities, prominent analyst Chris Versace of TheStreet Pro Portfolio has removed Qualcomm from his bull-stock watchlist. His decision is driven by persistent concerns regarding the decline in its business with Apple, noting that only 20% of Apple's smartphones will use Qualcomm chips this year, a figure expected to fall to zero next year. Furthermore, Versace questions whether Qualcomm can secure sufficient manufacturing capacity for AI and data center chips from major fabs like TSMC given intense competition from rivals such as Nvidia, AMD, Broadcom, and Marvell for limited capacity. The primary challenge facing Qualcomm is offsetting the anticipated drop in Apple revenue to maintain fiscal 2027 revenue near the current Wall Street consensus of $42.54 billion. Versace points out that earnings-per-share expectations for this year and next remain below the level achieved by the company in 2025, creating a risky outlook that has dampened enthusiasm despite the stock being up roughly 17% year-to-date. While management believes the data center entry is a game-changer, the market appears skeptical about whether these new segments can successfully replace revenue lost from its long-standing partnership with Apple before Qualcomm’s June analyst event provides more clarity.