The Overlooked Chip Stock Poised to Outperform Nvidia, AMD, and Broadcom in the AI Semiconductor Boom

Nvidia, Advanced Micro Devices, and Broadcom are among the leading artificial intelligence (AI) semiconductor companies, as major hyperscalers and AI labs are deploying their chip designs to run workloads in data centers.

Not surprisingly, all three companies have surged impressively over the past three years, clocking gains of more than 300% on the market. These semiconductor stocks could continue to deliver healthy long-term growth, driven by aggressive investments in AI data center infrastructure. However, there is a strong likelihood that they could be overshadowed by an underrated semiconductor company that has failed to capitalize on the AI boom so far -- Qualcomm (NASDAQ: QCOM).

Let's look at the reasons why Qualcomm could outperform its peers.

Image source: Getty Images.

Qualcomm's growth is poised to pick up thanks to AI

While Nvidia, AMD, and Broadcom have seen their share prices jump by more than 4x over three years, Qualcomm has clocked measly gains of just 63%. The PHLX Semiconductor Sector index, for comparison, has appreciated 232% in three years.

Qualcomm's poor returns aren't surprising. Its reliance on the smartphone market, where growth is difficult to come by, has kept its top and bottom lines under pressure. However, Qualcomm is now aiming to make a significant dent in the AI chip market. The company has been designing server central processing units (CPUs), AI accelerators, and rack-scale server systems to capitalize on the growing demand for agentic AI and inference applications.

Importantly, Qualcomm's efforts are bearing fruit. This is evident from the partnerships that Qualcomm has been striking with major hyperscalers. The chip designer announced an agreement with Meta Platforms in June to supply its Dragonfly data center CPUs. Qualcomm notes that these chips will power the advertising giant's next-generation AI servers. Even better, Qualcomm points out that Meta will deploy future generations of its server CPUs.

And now, Qualcomm's latest announcement that it is partnering with Amazon to make multiple generations of custom AI chips and optical connectivity components explains that it is indeed making a name for itself in AI chips. These partnerships explain why Qualcomm sees its data center revenue accelerating impressively.

The company estimates that its data center revenue will hit $5 billion in fiscal 2027 and scale up to $15 billion in fiscal 2029. The growing contribution from the data center segment should lift Qualcomm's growth rate. For instance, consensus estimates point to a 3% decline in Qualcomm's revenue to $43 billion in fiscal 2026. However, the forecast for the next couple of years points to a significant improvement.

Data by YCharts

I won't be surprised to see Qualcomm's growth exceeding estimates if it adds more hyperscalers and AI companies to its client list.

A strong bottom-line jump and a cheap valuation could send the stock higher

Qualcomm trades at under 17 times forward earnings, cheaper than its peers mentioned in this article.

Data by YCharts

However, an acceleration in the company's growth rate could be rewarded with a higher valuation. The good news is that Qualcomm's earnings-per-share growth rate could approach 25% in fiscal 2028.

Data by YCharts

If this AI stock trades at even 30 times earnings at that time, on account of its improving growth trajectory, a discount to the tech-focused Nasdaq-100 index's earnings multiple of 34, its price could jump to $390. That's 124% higher than its current stock price, suggesting that Qualcomm could witness a big rally and even outperform the other chip stocks mentioned in this article.

Harsh Chauhan has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Advanced Micro Devices, Amazon, Broadcom, Meta Platforms, Nvidia, and Qualcomm. The Motley Fool has a disclosure policy.