Qualcomm’s Diversification Efforts Will Increasingly Hinge on the Data Center

We expect Qualcomm’s chip business (QCT) and licensing business (QTL) to continue to generate healthy cash flow and reinforce the company’s narrow moat rating, as Qualcomm should remain an industry leader in chipsets and IP for 5G. Apple’s decision to build its own baseband chips, or modems, to displace Qualcomm will be a looming headwind, but not a death blow, especially as Qualcomm is transitioning into automotive, PC, Internet of Things, and data center processors.