One semiconductor maker is looking to capitalize on growth in two major AI-related markets, while another is struggling to turn its business around.
shares of Qualcomm (QCOM 1.22%) and intel (INTC -1.89%) The two companies are moving in opposite directions this year, a bit surprising at first given that both chipmakers face headwinds in their core markets and are relying on the proliferation of artificial intelligence (AI) to turn their fortunes around. It may seem like.
Intel's business has suffered in recent years due to declining sales of personal computers (PCs), while Qualcomm has struggled with sluggish sales of smartphones. Both of these end markets are expected to benefit greatly from the adoption of AI. However, his 19% rise in Qualcomm and 23% decline in Intel in the stock market in 2024 shows that the former is probably doing better as far as leveraging AI catalysts is concerned.
Let's see if that's really the case and whether Qualcomm is the better of the two companies when it comes to AI.
For Qualcomm
The smartphone market is expected to improve this year, and analysts expect the same to happen with Qualcomm. The company's fiscal year 2023 sales (ending September 24, 2023) were down 19% from the previous year to $35.8 billion, and adjusted earnings were down 33% to $8.43 per share. This is not surprising, since according to IDC, smartphone shipments decreased by an estimated 3.2% in 2023, following an 11.3% decline in 2022.
But analysts expect Qualcomm's sales to trend upward this year and further increase in the next few fiscal years. This is evident from the following graph.
The growth of AI-enabled smartphones will play a key role in Qualcomm's turnaround. Market research firm IDC predicts that 170 million AI-enabled smartphones could be shipped this year, more than three times the 51 million shipped last year. More importantly, IDC points out that AI smartphones will account for 15% of the total smartphone market this year, indicating that there is still plenty of room for future growth.
Even better, the AI ​​smartphone market is expected to register an annual growth rate of 83% from 2024 to 2027. Qualcomm is apple And Samsung. Qualcomm's Snapdragon processors are powering the AI ​​capabilities of Samsung's latest flagship smartphone, the Galaxy S24, and the company is poised to push the boundaries even further with a new chip targeted at midrange smartphones.
It is worth noting that market research firm Counterpoint Research expects Qualcomm to capture more than 80% of the generative AI smartphone market in the next few years. This is not surprising given the pace at which Qualcomm has already entered this market by acquiring major customers such as Samsung.
Additionally, Qualcomm is also eyeing the AI ​​PC market, which could open up new opportunities for the company to grow its business in the future. As such, Qualcomm appears to be well-positioned to take advantage of several burgeoning AI-related opportunities, which explains why this chip stock has been trending higher this year.
For Intel
Things are only getting worse for Inter as the year progresses. The company started 2024 with a better-than-expected earnings report for the fourth quarter of 2023, but failed to provide a solid outlook. Intel's Q1 2024 outlook is significantly lower than expected, which is why investors hit the panic button. Intel was dealt another blow when it was revealed that its foundry division was suffering huge losses.
As far as the company's AI efforts are concerned, management noted during the January earnings call that the revenue pipeline from AI accelerators is now over $2 billion. The company claims to have strengthened its supply chain “to support growing customer demand” and expects significant revenue acceleration throughout the year.
However, Intel is expected to generate $57.4 billion in total revenue this year, according to consensus forecasts, so a $2 billion revenue pipeline suggests AI won't be a game-changer for the company. Masu. Meanwhile, Chipzilla faces stiff competition from the United States. AMD In the market for AI PC processors. AMD CEO Lisa Su claims that the company's Ryzen processors are installed in more than 90% of AI PCs on the market today.
This probably explains why AMD's revenue from its client business grew at a much faster pace than Intel's last quarter. Specifically, Intel's Client Computing Group's revenue was $8.8 billion, up 33% year-over-year in Q4 2023. Meanwhile, AMD recorded 62% year-on-year growth in client segment revenue during the same period.
With AMD taking market share from Intel in the PC market thanks to AI-enabled PCs, and Qualcomm also looking to enter this market, Chipzilla may find it difficult to take full advantage of the growing AI adoption.
verdict
It is clear that Qualcomm is well-positioned to take advantage of the AI ​​opportunity as it is expected to gain a solid share in AI smartphones. Meanwhile, Intel has a lot of catching up to do in both the AI ​​data center chip and PC markets. Additionally, Intel is expensive compared to Qualcomm, with a price-to-earnings ratio (P/E) of 110. Qualcomm is much cheaper at 24.
Qualcomm's forward P/E ratio of 18 is also lower than Intel's multiple of 33. Investors are currently getting a better deal with Qualcomm. As such, you may want to consider buying this AI stock over Intel before its stock price soars after a solid start. Until 2024.
Harsh Chauhan has no position in any stocks mentioned. The Motley Fool has positions in and recommends Advanced Micro Devices, Apple, and Qualcomm. The Motley Fool recommends Intel and recommends the following options: These are a long call on Intel at $57.50 in January 2023, a long call on Intel at $45 in January 2025, and a short call on Intel at $47 in May 2024. The Motley Fool has a disclosure policy.