On Wednesday, HSBC adjusted its stance on Qualcomm shares (NASDAQ:QCOM), moving from a Buy to a Hold rating, despite increasing the price target to $200 from the previous $190. The revision comes after a reassessment of the AI PC market's potential following the Computex event, where new AI PC models featuring Qualcomm's Snapdragon X Elite/X Plus processors were introduced.
The initial enthusiasm for Qualcomm's AI PCs, fueled by the company's early move in the market and its processors' 40 TOPS benchmark, has been dampened by mixed performance reviews. Consequently, HSBC now anticipates that Qualcomm will ship only 600,000 AI CPUs in the fiscal year 2024, a reduction from the market's expectation of 1 to 1.5 million units.
Furthermore, the average selling price (ASP) for these AI CPUs is projected to be between $80 and $100, which is significantly lower than the previously estimated range of $200 to $300. As a result, HSBC forecasts AI CPU revenue to be around $60 million for the fiscal year 2024 and $420 million for the fiscal year 2025. These figures represent a modest 0.2% and 1.0% of the company's expected revenues for those years, respectively.
Even under the most optimistic scenario, where Qualcomm could ship 10 to 20 million AI CPUs by the fiscal year 2025, this would only constitute 2% to 5% of the forecasted sales for that year. According to HSBC's analysis, this scenario would still offer limited earnings upside, with a mere 3% increase in earnings.
In other recent news, Qualcomm has been the subject of significant attention. KeyBanc has raised the price target for Qualcomm shares to $225, reflecting a positive long-term outlook for the company's role in edge-AI technology. Similarly, TD Cowen has increased its price target on the company's shares to $235, while Mizuho Securities raised its price target from $180 to $240, with both firms maintaining a Buy rating.
Qualcomm has also settled a shareholder lawsuit for $75 million, resolving allegations of anticompetitive sales and licensing practices. In addition to these developments, Qualcomm is expected to benefit from its relationship with Samsung, with the potential to generate an additional $1.6 billion in revenue from the upcoming GS25 model.
Meanwhile, Chinese technology firms, including SenseTime, have unveiled over 150 AI-related products and solutions at the World AI Conference in Shanghai. Samsung Electronics (KS:005930) has also been actively exploring cooperation in artificial intelligence, cloud services, and semiconductor technology with industry leaders, including Qualcomm.
InvestingPro Insights
Qualcomm (NASDAQ:QCOM) continues to make strides as a prominent player in the Semiconductors & Semiconductor Equipment industry. With a steadfast commitment to shareholder returns, Qualcomm has raised its dividend for an impressive 21 consecutive years, underpinning a strong track record of financial resilience and stability. The company's ability to maintain dividend payments for 22 consecutive years is a testament to its consistent performance and strategic market positioning. Moreover, Qualcomm's liquid assets surpass its short-term obligations, providing it with a cushion to navigate market uncertainties.
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