Morningstar

Qualcomm: Raising Fair Value with a Bright AI Forecast

We think Qualcomm is in a good position to capture a piece of the AI pie.

Collage illustration for Technology Sector with a semiconductor chip.
Securities in This Article
Qualcomm Inc
(QCOM)

Key Morningstar Metrics for Qualcomm

  • Fair Value Estimate
    : $200.00
  • Morningstar Rating
    : ★★★
  • Morningstar Economic Moat Rating
    : Narrow
  • Morningstar Uncertainty Rating
    : High

Qualcomm QCOM hosted an investor event focused on its emerging data center chip business. Qualcomm expects $40 billion in non-handset chip revenue in fiscal 2029, with $18 in adjusted EPS. The firm forecasts $5 billion and $15 billion of data center revenue in fiscal 207 and fiscal 2029, respectively.

Why it matters: Qualcomm hinted at big news coming within this event. We view the technological announcements as substantial but not mindblowing. The company’s data center revenue forecast from these products was better than we expected.

  • Two hyperscale customers will exceed $1 billion in fiscal 2027, which intrigues us, as Qualcomm’s server CPU deal with Meta is presumably not included, since it will ramp in the second half of 2028. Microsoft and Google presented at the event, and perhaps these are the two immediate customers.

The bottom line: We raise our fair value estimate for narrow-moat Qualcomm to $200 per share from $155. Shares rose as much as 14% after hours with the strong financial forecast. We think this more optimistic data center forecast justifies a higher fair value estimate for Qualcomm.

  • We took a wait-and-see attitude to Qualcomm’s event, but the firm’s forecast and signed deals with hyperscalers suggest that its new artificial intelligence initiatives will gain adoption with leading customers ahead of our expectations.
  • Qualcomm touted its strong track record of execution and healthy relationships with mega-cap tech leaders across non-AI products (smartphones, headsets, and so on), and we think this put Qualcomm in a good position to capture a piece of the AI pie.

Long view: Although Qualcomm will likely exceed our prior expectations for its data center business over the next few years, we don’t anticipate it will usurp Nvidia’s wide moat or early-mover advantage in AI. Still, taking a sliver of this massive AI computing opportunity bodes well for earnings growth.

Editor’s Note: This analysis was originally published as a stock note by Morningstar Equity Research.

The author or authors do not own shares in any securities mentioned in this article. Find out about Morningstar’s editorial policies.

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