This chip stock is the only one falling this year. Is it the opportunity of a decade?
Chip stocks are up by tens of percent this year, but Qualcomm is losing. Yet it signed a historic deal with Meta and is preparing the biggest transformation in its history. The market doesn't believe it - and that may be exactly where the opportunity lies.
Key points
Qualcomm shares are down 7% this year, while the chip sector has grown by 68% - a 75 percentage point gap is a public vote of no confidence from the market.
Mark Zuckerberg has signed a multi-generational deal with Qualcomm: Dragonfly processors are to power Meta's AI servers.
In March 2027, the agreement with Apple ends and Qualcomm will lose a billion-dollar business - exactly this loss is what the market is already pricing in today.
Company CEO Cristiano Amon promises that non-phone revenue growth will accelerate from 24% to more than 60% next year.
Analysts see a target price around $204, the stock trades around $160 - and at just 18 times earnings.
Imagine a company that this year signed perhaps the most important contract in its history, gained Meta and Microsoft as customers, and whose CEO promises that a key part of the business will accelerate growth from 24% to more than 60% next year. And now imagine that the stock of this company is falling this year, while the entire chip sector celebrates records.
That is exactly the story of Qualcomm $QCOM. While the chip stock index in the form of the iShares Semiconductor ETF has added over 68% this year, Qualcomm shares have lost about 7%. A 75 percentage point gap against its own sector - that is not just lagging, that is a public vote of no confidence.
The billion-dollar question is: is the market wrong, or does it know something?