This Artificial Intelligence (AI) Powerhouse Could Be Just Getting Started

Source Motley_fool

Artificial intelligence (AI) has long drawn the interest of investors. AI has been used in various forms going back to the turn of the century for companies like Google parent Alphabet, and others. The generative AI boom is a much more recent breakthrough, and it is driving considerable investment returns for companies like Nvidia and Palantir Technologies.

The AI-based breakthroughs continue, and that is inspiring gains in other AI-driven tech stocks. Such gains may have just begun for one particular tech stock.

Where to invest $1,000 right now? Our analyst team just revealed what they believe are the 10 best stocks to buy right now. Continue »

A person holds a smartphone displaying an AI chat window.

Image source: Getty Images.

A stock positioned to benefit from AI

The stock that is well-positioned to start benefiting from the latest AI changes is Qualcomm (NASDAQ: QCOM).

Admittedly, Qualcomm does not look much like a winner in AI. It released the Snapdragon 8 Gen 3 in the fall of 2023, empowering users to incorporate AI into their smartphones. Although revenue growth in handset sales eventually returned to double-digit levels, AI has failed to inspire the level of increased sales that Qualcomm experienced when users wanted to upgrade to 5G.

Moreover, after years of failed attempts, Apple appears finally ready to replace Qualcomm's chips in the iPhone with chips of its own design. Assuming Apple does not reverse course, Qualcomm is set to lose one of its largest customers.

However, it may hearten investors to know that Qualcomm has long prepared for the day when it will depend less on smartphones.

Its Internet-of-Things (IoT) segment has applied its communications abilities to develop end-to-end IoT solutions for applications such as smart homes and industrial automation. Additionally, its communications and AI advances could make it a leader in self-driving through its automotive segment. In the first six months of fiscal 2025 (ended March 30), revenue for the IoT and automotive segments increased at annual rates of 31% and 60%, respectively, significantly outpacing the 12% growth in the handset segment over the same period.

Furthermore, Qualcomm has developed PC chips, making it a competitor to AMD and Intel. In the data center market, it has also partnered with Nvidia to develop custom chips that can support AI workloads within data centers.

Effects on financials

These recent advancements appear to be helping Qualcomm's top and bottom lines more than its stock. In the first two quarters of fiscal 2025, revenue of nearly $23 billion increased by 17% compared with the same period in fiscal 2024. During the same period last year, revenue had risen by only 3% annually.

In the first six months of the year, Qualcomm kept a lid on operating expense growth. Still, with lower investment income and rising income tax expenses, its $6 billion in net income grew by 18% yearly.

Nonetheless, such improvements have not swayed investors. Over the last 12 months, Qualcomm stock dropped by almost 20%, though it is up 27% from the lows it reached in April.

Additionally, the stock sells at a 16 P/E ratio. Although that is not much lower than the average P/E ratio of 20 over the last five years, the earnings multiple suggests a lack of investor optimism about Qualcomm stock. And yet, this reasonable valuation could inspire a bull market in Qualcomm stock. Assuming its non-handset segments continue to grow at a rapid rate, it could start Qualcomm stock on a long-term growth trend.

The growth prospects of Qualcomm stock

Considering the state of Qualcomm's business and stock, it has real potential to begin a long-term growth trend. Admittedly, a lackluster AI growth cycle and the likelihood of losing Apple as a customer have soured some investors on Qualcomm. However, the company has returned to revenue and earnings growth, and its burgeoning IoT and automotive segments deserve significant credit for this surge.

Ultimately, such improvements should not lead to a falling stock price and a rock-bottom valuation. Once Qualcomm's role in AI becomes clearer, such conditions could inspire the beginning of a long-term uptrend in Qualcomm stock.

Should you invest $1,000 in Qualcomm right now?

Before you buy stock in Qualcomm, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Qualcomm wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $713,547!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $966,931!*

Now, it’s worth noting Stock Advisor’s total average return is 1,062% — a market-crushing outperformance compared to 177% for the S&P 500. Don’t miss out on the latest top 10 list, available when you join Stock Advisor.

See the 10 stocks »

*Stock Advisor returns as of June 30, 2025

Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Will Healy has positions in Advanced Micro Devices, Intel, and Qualcomm. The Motley Fool has positions in and recommends Advanced Micro Devices, Alphabet, Apple, Intel, Nvidia, Palantir Technologies, and Qualcomm. The Motley Fool recommends the following options: short August 2025 $24 calls on Intel. The Motley Fool has a disclosure policy.

Disclaimer: For information purposes only. Past performance is not indicative of future results.
placeholder
Bitcoin Must Clear This Critical Cost Basis Level For Continued Upside, Analyst SaysIn a recent CryptoQuant Quicktake post, contributor Crazzyblockk highlighted key Bitcoin (BTC) cost basis zones that the leading cryptocurrency must clear – or avoid breaking below – to
Author  NewsBTC
4 Month 23 Day Wed
In a recent CryptoQuant Quicktake post, contributor Crazzyblockk highlighted key Bitcoin (BTC) cost basis zones that the leading cryptocurrency must clear – or avoid breaking below – to
placeholder
Ethereum Price Tests Resistance — Breakout Could Spark RallyEthereum price started a fresh increase above the $2,480 zone. ETH is now consolidating gains and might soon aim for a move above the $2,520 resistance. Ethereum started a fresh upward move above the
Author  NewsBTC
6 Month 30 Day Mon
Ethereum price started a fresh increase above the $2,480 zone. ETH is now consolidating gains and might soon aim for a move above the $2,520 resistance. Ethereum started a fresh upward move above the
placeholder
Insane Or Insightful? VC Firm Says XRP Could Reach Nearly $9,000 In Just 5 YearsUS regulators and market watchers are eyeing a fresh valuation study that puts XRP on track for a dramatic price surge by 2030. Related Reading: The $100K Mirage: Bitcoin’s Rally Not Backed By
Author  NewsBTC
12 hours ago
US regulators and market watchers are eyeing a fresh valuation study that puts XRP on track for a dramatic price surge by 2030. Related Reading: The $100K Mirage: Bitcoin’s Rally Not Backed By
placeholder
Strong Ethereum Accumulation Detected: LTH Buying Heavy During June ConsolidationEthereum is trading above $2,400 after enduring several days of volatility and uncertainty. The price has managed to stabilize despite sharp intraday swings, reflecting growing tension between
Author  NewsBTC
12 hours ago
Ethereum is trading above $2,400 after enduring several days of volatility and uncertainty. The price has managed to stabilize despite sharp intraday swings, reflecting growing tension between
placeholder
Australian Dollar remains subdued following China’s Caixin Manufacturing PMIThe Australian Dollar (AUD) edges lower against the US Dollar (USD) on Tuesday after registering more than 0.50% losses in the previous session. The AUD/USD pair loses ground as Australia’s S&P Global Manufacturing Purchasing Managers’ Index (PMI) falls to 50.6 in June from the previous 51.0.
Author  FXStreet
12 hours ago
The Australian Dollar (AUD) edges lower against the US Dollar (USD) on Tuesday after registering more than 0.50% losses in the previous session. The AUD/USD pair loses ground as Australia’s S&P Global Manufacturing Purchasing Managers’ Index (PMI) falls to 50.6 in June from the previous 51.0.
goTop
quote