JPMorgan Chase supports Qualcomm's AI bull market: Farewell to single-core smartphones narrative, edge AI catalyzes new round of growth.

Wall Street financial giant Morgan Stanley's latest research report pointed out that semiconductor giant Qualcomm's business scope has expanded from over-reliance on the smartphone business in the past few years to include expansion into the PC side (especially emphasizing high-end configuration with edge AI capabilities AIPC), high-performance automotive chips, IoT, and other areas. Each business sector shows different growth momentum and future DRIVE, achieving robust growth through diversified layout. This multi-engine-driven performance growth model is expected to drive Qualcomm's performance in the third quarter and the entire fiscal year 2025 to exceed the general expectations of Wall Street. Furthermore, against the backdrop of the US technology sector reaching new highs, Qualcomm, with its diversified business and long-term steady growth, is seen as a rare alpha semiconductor stock target with both defensive attributes and long-term growth potential. Morgan Stanley bluntly stated that Qualcomm has extremely rare defensive and low-volatility steady growth attributes for semiconductor companies. It has stable patent licensing (QTL) business driving continuous cash flow expansion and diversified semiconductor businesses including AIPC and AI smartphones with growth potential. In the new era driven by AI, Qualcomm's unique position should command a higher valuation multiple. This is also an important reason why Morgan Stanley predicts that Qualcomm's fundamentals are expected to be gradually revalued as performance meets market expectations and the performance growth path is significantly driven by edge AI catalysis. Morgan Stanley's analyst team emphasized that Qualcomm's diversified strategy in recent years not only helps offset the impact of volatile business fluctuations from single customers (such as Apple Inc.), but also gives the company's fundamentals a stronger stability and resilience. In the background of the US stock market repeatedly hitting new highs but becoming more cautious due to new tariff pressures and high valuations in the technology sector, Qualcomm is seen as a scarce semiconductor target with both defensive attributes and long-term growth potential. Morgan Stanley reiterated its "overweight" rating for Qualcomm's stock and raised its target price within 12 months from $190 to $200. As of the close of the US stock market on Tuesday, Qualcomm's stock price closed near $162. Qualcomm's diversified business map: layout and multi-engine growth dynamics in the fields of smartphones, AIPC, automotive, IoT, etc. Qualcomm's revenue composition is becoming increasingly diversified, covering sectors such as smartphones, PCs, automotive electronics, and the Internet of Things (IoT). Smartphones remain Qualcomm's largest business pillar, mainly relying on the Snapdragon series of high-performance mobile chips and dominating the market with 5G baseband chips firmly entrenched through patents. Morgan Stanley emphasized that in the context of a slowdown in the overall smartphone market, Qualcomm is arguably the biggest beneficiary of the edge AI trend - benefiting from strong demand for high-end "AI smartphones" embedded with AI functions, especially achieving low double-digit year-on-year growth in the flagship Android device sector to some extent offset the industry's weakness. Edge AI refers to deploying AI models directly on end/local devices to complete inference or training where data is generated, rather than uploading data to the cloud for processing. This can bring millisecond response times, reduce bandwidth, and privacy risks. Qualcomm's core strategy revolves around Edge AI: providing local AI inference super acceleration for AI smartphones, AI PCs, vehicle cabins/ADAS platforms, and IoT devices through Snapdragon SoC's built-in exclusive high-performance AI Engine/NPU, Oryon CPU+NPU for PCs, automotive cockpit/ADAS platforms, and IoT QCS/QRB series chips, making edge AI product lines gradually become the focus of Qualcomm's performance growth. Morgan Stanley stated in the report that the PC sector has become a new focus point for Qualcomm's edge AI strategy, especially for "AIPC" aimed at artificial intelligence applications. Qualcomm is introducing a computing platform based on ARM architecture and integrated with AI acceleration (such as the Oryon CPU that challenges traditional x86 market share and Qualcomm's unique NPU architecture), targeting innovative opportunities in the AI laptop market. Although this area currently accounts for a small proportion of Qualcomm's total sales, it has considerable growth potential in the future and will enrich Qualcomm's layout in edge computing devices. Qualcomm's automotive chip business has shown impressive performance in recent years, maintaining about 30% high-speed growth recently, mainly driven by strong demand for vehicle SoC, ADAS platforms, and communication modules in the automotive industry's digitalization and electrification trends. Qualcomm has accumulated over $30 billion in automotive chip order reserves, and the automotive sector is expected to continue to be a strong engine for the company's sales. The IoT business sector covers a wide range, including wearable devices, AR/VR, smart homes, industrial IoT, and more, bringing stable growth (recent growth rates in the mid-double digits). These non-smartphone businesses mentioned above now account for 20-40% of Qualcomm's revenue in total and are growing faster than the core smartphone business. Morgan Stanley emphasized that the results of Qualcomm's diversified strategy are particularly evident in the significant improvement in its counter-cyclical ability. When a single market (such as smartphones) slows down, growth in other areas can provide a buffer. For example, Morgan Stanley's report emphasizes that even without Apple Inc., a long-standing major customer, Qualcomm's overall revenue guidance remains resilient, which is a manifestation of the "peaks and troughs" effect of diversified layout. Business diversification also helps the market give Qualcomm a higher valuation: after all, Qualcomm is no longer a semiconductor company purely dependent on the smartphone cycle but has growth poles in automotive, PC, IoT, and other multi-domain areas. This layout reduces its sensitivity to fluctuations in a single market while significantly enhancing its defensive capabilities, and it can also benefit from the growth dividends of multiple emerging markets in automotive, PC, IoT, and other semiconductor businesses. Morgan Stanley reiterated a bullish stance and raised the target price to $200 In the report, Morgan Stanley detailed its profit forecasts and valuation logic for Qualcomm in the coming years and reiterated its "overweight" rating, raising the target stock price to the significant threshold of $200. The institution's calculation model shows that Qualcomm's earnings per share (EPS) will continue to grow in the fiscal years 2025 to 2027: the EPS for the next three fiscal years is expected to fluctuate around $10, exceed $12, and approach $14, showing a steady double-digit growth trend (with the negative impact of Apple Inc.'s baseband chip business excluded, this trend will be more significant). The report specifically pointed out the performance outlook that will be reflected in the fourth quarter of the fiscal year 2025 (ending in September), which is expected to be the first quarterly period gradually excluding Apple Inc.'s 5G baseband business. At that time, Qualcomm is still expected to achieve year-on-year growth or remain stable, proving to investors the success of Qualcomm's diversified strategy. The Morgan Stanley analysis team believes that the short-term impact of Qualcomm losing Apple Inc. orders can be gradually offset by the growth of its other diversified business pipelines, and the company is exploring new opportunities (such as edge AI inference acceleration) to outperform the gap caused by the loss of Apple Inc. Based on the strong profit outlook mentioned above, Morgan Stanley used the price-to-earnings (P/E) ratio and EV/EBITDA method to perform a long-term valuation of Qualcomm. The report set the target valuation multiple at around 15x, slightly higher than the market's general expectation of Qualcomm's P/E ratio of about 13-14x, reflecting the analysts' confidence in Qualcomm's long-term earnings growth and acknowledging the higher valuation and greater tolerance for strong performance growth brought by Qualcomm's business diversification centered on edge AI. According to the aforementioned valuation method, Morgan Stanley raised the year-end 2026 target price to $200. This target price is derived from the forecasted EPS for the fiscal year 2027 multiplied by the expected P/E ratio of about 15x. The report mentioned that the choice of a 15x valuation is mainly due to the stronger growth expected after gradually excluding the negative impact of Apple Inc.'s business, driven by the demands of high-end iPhone models for the shift cycle under the Trump tariff policy causing demand escalation and the significant growth opportunities in edge AI in the PC sector, combined with Qualcomm's execution in expanding into new business areas such as automotive, IoT, supporting a higher valuation level. Compared to the current stock price, this target price corresponds to a strong potential upward movement of about 25% in the next 12 months. Trends in the semiconductor industry and the rarity of Qualcomm With the current advancement of the US tech sector, Morgan Stanley maintains an optimistic view on the overall trend of the semiconductor industry, paying particular attention to opportunities in niche areas such as high-performance AI chips for data centers, automotive electronics, and edge computing. As Generative AI applications and AI intelligent body technology thrive, the market spotlight is mainly on data center AI chip companies. However, the report emphasizes that the "edge-side" AI wave is equally worth noting - a large amount of AI computation will sink to end-user devices such as smartphones, PCs, electric vehicles, IoT devices, and industrial terminals, precisely the areas where Qualcomm excels. For example, Qualcomm's latest generation of smartphone and PC processors integrate powerful AI acceleration units that can efficiently handle local AI inference tasks requiring high computational power at local terminals. In the automotive sector, strong edge AI chips are needed for autonomous driving and intelligent cockpits, and IoT devices are increasingly becoming intelligent. Morgan Stanley believes that Qualcomm's technological leadership in edge AI computing gives it unique value in the semiconductor landscape: compared to companies focused only on cloud or single AI data center domains, Qualcomm spans mobile phones, automobiles, the IoT, and has a multi-point layout for AI application implementation. This rarity in the semiconductor business combination will gain more recognition in the market. Morgan Stanley emphasized that as Qualcomm's fundamentals enter a new expansion cycle, Qualcomm may exhibit the characteristic of being "able to attack while also being able to defend." When the market improves, and risk appetite rises, Qualcomm may accelerate its rise by unleashing its underestimated growth attributes (such as strong demand for edge AI devices like AI smartphones and AIPC, and automotive chip progress exceeding expectations). If the macro environment weakens, Qualcomm's diversified business and relatively low valuation make it defensive, less likely to experience extreme declines, and Qualcomm has extremely rare defensive and low-volatility steady growth attributes for a semiconductor company. It has a stable patent licensing (QTL) business driving continuous cash flow expansion and diversified semiconductor businesses including AIPC and AI smartphones with growth potential. From the perspective of trading prices and reasonable valuation ranges, Morgan Stanley believes that the current stock price and valuation are still at a relatively low position. Qualcomm's valuation level does not yet reflect its long-term growth potential, and it is far from being considered overheated. In the background of the S&P 500 index continuously hitting new highs, Qualcomm may not be the hottest speculative target, but its underestimated fundamentals, strong growth from diversified businesses, and balanced risk-return characteristics with rare defensive attributes in the semiconductor industry provide investors with a choice that considers both defense and offense.