Qualcomm Faces Challenges in CPU Market Re-Entry Against Giants

Qualcomm’s (NASDAQ: QCOM) renewed effort in the CPU semiconductor market is significant, yet it may not substantially alter its market position. This move supports NVIDIA’s (NASDAQ: NVDA) choice to open the NVLINK system to other manufacturers through NVLINK Fusion. However, the CPU sector is predominantly controlled by Intel and Advanced Micro Devices (NASDAQ: AMD), which are expected to respond vigorously. NVIDIA’s involvement is essential; allowing third-party manufacturers to integrate NVLink hardware into their products streamlines AI developers’ ability to construct semi-custom AI infrastructure for efficient data processing.

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What share of the datacenter CPU market can Qualcomm realistically capture? With the market projected to be around $14.15 billion by 2025, garnering a meaningful share would require significant growth.

This is feasible given NVIDIA’s leading position in AI GPUs. Establishing a new revenue stream would diversify Qualcomm’s business and capitalize on the strong growth anticipated in the sector. Securing a foothold in the replacement and upgrade cycle could significantly benefit Qualcomm.

Analysts predict the global data center industry will grow at a moderate single-digit CAGR through the next decade, resulting in an increase of more than 110%. Currently, Intel controls approximately 75% of the market, with AMD capturing most of the remaining share, making it a challenging environment for newcomer Qualcomm.

Analysts Unimpressed with Qualcomm’s NVIDIA-Compatible CPUs

Market analysts view Qualcomm’s re-entry into the CPU market with NVIDIA-compatible products as uninspiring. MarketBeat reported no revisions or notable commentary within the first 24 hours post-announcement—an essential period for impactful analyst activity. Investors should note that Qualcomm has a weak Hold rating, with sentiment declining and downgrades anticipated for 2025. The mid-May consensus from MarketBeat suggested a 25% upside potential, but revisions indicate a likely shift into the low-end range near $150.

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The lackluster analysts’ sentiment stems from a stagnant growth outlook that the recent news has not improved. Analysts forecast roughly 10% revenue growth in 2025, followed by a slower growth rate of about 2.5% CAGR through the end of the decade. There is some positive news regarding capital returns; growth in capital returns, including dividends and share repurchases, appears stable. The dividend yields more than 2.25%, with shares currently trading at the lower end of analysts’ estimates, and substantial buyback activity continues. Notably, share repurchases in FQ2/CQ1 2025 reduced share counts by 1.3% year-over-year and about 1% year-to-date.

Qualcomm’s balance sheet also remains robust, another positive for investors and long-term stakeholders. The company’s assets are stable, debt levels are flat, total liabilities have decreased, and equity has risen by nearly 6%. With long-term debt less than 0.5x equity and a solid cash position, Qualcomm is well-positioned to maintain capital returns for the foreseeable future. The company is on track to be included in the Dividend Aristocrats Index by 2030, although the CAGR for dividends is expected to slow, with recent increases being mid-single-digit percentages.

Technical Outlook: QCOM Stock at a Critical Point

Qualcomm stock experienced gains in early May, with potential for continued progress in Q2. Currently, the market is range-bound and at a critical inflection point, possibly limiting further advances. A cluster of moving averages at this level coincides with a former support level.

If the stock does not rise from its current position, it may revert to the lower end of the range. Nevertheless, if it climbs higher, it may struggle to surpass recent highs near $175.

The views and opinions expressed herein are those of the author and do not necessarily reflect those of Nasdaq, Inc.