Is This the Most Overlooked AI Stock Trading Today?

The artificial intelligence (AI) megatrend has supercharged the semiconductor sector in the past three years, and that's reflected in the 148% gain clocked by the PHLX Semiconductor Sector index during the period. A number of companies have benefited from the booming demand for the specific types of high-end chips required to run AI workloads in data centers, and their sales and earnings gains have resulted in massive jumps in their stock prices.

Qualcomm (NASDAQ: QCOM), however, has experienced far less of that AI tailwind so far. Its shares are up just 33% in the past three years, substantially underperforming the semiconductor sector. A key reason why that has been the case is because of its reliance on the slow-growing smartphone segment for a major chunk of its revenue.

Investors, however, would do well to take a closer look at this semiconductor company right now as AI is likely to give its business a big boost.

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AI will be a big catalyst for Qualcomm

Qualcomm released its fiscal 2025 fourth-quarter results on Nov. 5 (for the three months ended Sept. 28). For the year, its revenue rose 13% to $44.1 billion, while its non-GAAP earnings increased by 18% to $12.03 per share. Of course, those gains were nowhere near the phenomenal growth rates that peers such as Nvidia, Broadcom, and others were clocking, but its top-line growth was 4 percentage points faster than in the prior year.

There is a strong possibility of Qualcomm's growth accelerating. That's because the company's Snapdragon smartphone processors are gaining more traction within the fast-growing generative AI smartphone space. CEO Cristiano Amon remarked on the earnings call that its latest Snapdragon processor has been chosen for deployment by leading smartphone OEMs (original equipment manufacturers) in China, such as Vivo, Xiaomi, OnePlus, and others.

What's more, Qualcomm is reportedly going to supply 75% of the smartphone processors for Samsung's upcoming Galaxy S26 series. Throw in the fact that Qualcomm will continue to supply modems to Apple for its 2026 iPhones, and there is a good chance of its handset business accelerating further.

After all, the generative AI smartphone market is expected to clock 51% growth in shipments next year, according to Gartner, as compared to the 42% growth projected for 2025. Qualcomm's relationship with the leading names in smartphones should enable it to capitalize on this market's accelerating growth, paving the way for a bigger jump in its top and bottom lines.

The good part is that Qualcomm's AI prospects aren't just limited to the smartphone market. Of course, this segment produced 63% of its total revenue in fiscal 2025, but the company will need to make a dent in other areas as well to maintain strong levels of growth in the long run. This is where its data center chip efforts come into play.

Qualcomm recently announced that it is partnering with state-backed Saudi Arabian AI company Humain to power 200 megawatts (MW) of data centers for AI inference applications. Humain will be deploying Qualcomm's AI200 and AI250 rack-scale solutions. Management says that its data center business will start moving the needle for it starting in its fiscal 2027, but don't be surprised if it starts happening earlier on account of the massive investments that are being made in AI infrastructure around the globe.

Also, investors shouldn't forget that Qualcomm's Internet of Things (IoT) business is gaining impressive traction thanks to the proliferation of AI in edge devices. It reported 22% year-over-year growth in IoT revenue last quarter, and it has been shoring up its IoT business by way of acquisitions, aiming to "provide a comprehensive Edge AI development platform for a broad set of applications."

That's a smart thing to do, as the edge AI market is expected to grow at an annualized pace of almost 37% through 2030. As such, it won't be surprising to see AI moving the needle in a bigger way for Qualcomm in the coming years, and that could supercharge this semiconductor stock.

Here's what makes the stock a no-brainer buy right now

We have seen that Qualcomm finished its fiscal 2025 with impressive double-digit growth. Moreover, it is capable of sustaining such growth rates in the future thanks to the catalysts discussed above.

Yet, the stock is trading at just 14 times forward earnings. That's well below the average multiple of 26 of the Nasdaq-100 index, a common proxy for the tech sector. Even Qualcomm's price-to-sales ratio of 4.2 is lower than the U.S. tech sector's average of 8.4.bQualcomm trades at such attractive multiples because the market has been overlooking its AI potential.

But if the company continues to grow at a healthy double-digit percentage rate due to the reasons discussed above, investors could start reassessing it, and rewarding it with a higher multiple. That could lead to even more upside, which is why savvy investors should consider buying this AI stock before it goes on a bull run.

Harsh Chauhan has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Apple, Nvidia, and Qualcomm. The Motley Fool recommends Broadcom and Gartner. The Motley Fool has a disclosure policy.