Among the high-flying tech stocks of 2023, it seems like the market has left Qualcomm (NASDAQ:QCOM) stock behind.
I’m not saying that Qualcomm will be the next Nvidia (NASDAQ:NVDA). However, like Nvidia, Qualcomm offers artificial intelligence compatible products. Plus, investors focused on value and dividends ought to take a look at Qualcomm.
As the old saying goes, a rising tide lifts all boats. Yet, Qualcomm stock hasn’t gotten much of a lift in 2023, so far.
That’s frustrating, as the large-cap technology sector has generally moved much higher this year. But don’t worry, as Qualcomm could still have its day in the sun; most likely, it’s just a matter of time.
QCOM Stock Isn’t a Perfect Pick
Don’t get the wrong idea. I’m recommending a $1,000 position in QCOM stock, not $10,000 or $100,000. After all, Qualcomm has its fair share of challenges, especially on the fiscal front.
Qualcomm has been consistently profitable and has a track record of earnings beats. However, the company’s next earnings release is coming up soon, and Qualcomm really needs to knock it out of the park.
That’s because Qualcomm had a less-than-stellar second-quarter fiscal 2023 performance. On a year-over-year basis, the company’s revenue declined 17% and Qualcomm’s net income dropped 42%.
So, don’t go overboard if you plan to buy Qualcomm stock. Qualcomm’s GAAP trailing 12-month price-to-earnings (P/E) ratio of 13.06x should entice value investors; the sector median P/E ratio is 25.59x.
Income-focused investors should appreciate Qualcomm’s 2.48% annual dividend yield (the sector average is 1.025%).
Qualcomm Has an Underappreciated AI Connection
Qualcomm didn’t emphasize AI in its most recently released quarterly earnings report and Form 10-Q.
However, this doesn’t mean that the company is missing out on the machine learning trend. Indeed, today the company claims, “Qualcomm 5G and AI innovations are the power behind the connected intelligent edge.”
If Nvidia’s valuation can bloom with the AI boom, why can’t Qualcomm stock gain significant value too? In that vein, TD Cowen analyst Matthew Ramsay met with Qualcomm CEO Cristiano Amon and considered the company’s ability to capitalize on the machine learning market’s growth.
Ramsay’s takeaway from that meeting is enlightening. “In management’s view, as AI adoption grows and as computing demands increases, a hybrid AI architecture will be needed to distribute processing across the cloud and end-devices rather than within the cloud alone,” he said.
Thus, Ramsay concludes, Qualcomm can “leverage its existing expertise and share in handsets and mobile devices into emerging edge computing and inference… applications.”
Presumably, AI technology would help to generate inferences and responses.
In other words, Qualcomm’s chips could facilitate AI processing on smartphones and other devices. Hence, there may be a growth narrative for Qualcomm that parallels what we’ve seen with Nvidia. It’s not a sure thing, but an intriguing possibility.
Try a $1,000 Stake in Qualcomm Stock
Even if you don’t envision Qualcomm getting the love that Nvidia has garnered on Wall Street, there are still reasons to consider Qualcomm stock. At the very least, we can’t deny Qualcomm’s decent dividend and reasonable valuation.
Besides, there’s an AI angle with Qualcomm that the market hasn’t fully priced into the shares. Consequently, this is a great time to invest a moderate amount – say, $1,000 – in QCOM stock for a long-term position.
On the date of publication, David Moadel did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
