Qualcomm’s AI Ambitions Run Into a Smartphone Reality Check

Key Points

• Qualcomm’s handset business remains under pressure from lower OEM build plans, memory costs and Apple’s shift toward its own modems.
• Qualcomm’s automotive and IoT businesses are growing, while management has raised its fiscal 2029 non-handset revenue target to $40 billion.
• Qualcomm’s valuation leaves room for upside, but investors still need the company’s AI, auto and data-center push to offset handset weakness.

With shares down about 5% year to date (YTD), Qualcomm Inc. NASDAQ: QCOM is hardly the most glamorous name in AI. The company neither builds the agents that capture headlines nor operates cloud platforms that draw institutional business.

Still, the company's underlying strength is hard to dismiss: it helps to put AI into just about everything else, including smartphones, cars, industrial tools in factories and manufacturing, and much more. This may give the company, often seen as an old-fashioned firm because of its legacy in digital cellular technology, a continued path to both relevance and long-term competitiveness.

First, however, investors are likely to look at the company's recent turbulence (particularly the period of decline in late spring and summer). There is an argument to be made that Qualcomm could once again be transformative over the long-term, though it requires reconciling some not-so-appealing performance measures.

Qualcomm's Turbulence Is Real

Recent earnings have not helped Qualcomm build momentum: a 4% year-over-year (YOY) dip in sales was slightly better than expected for Q3 2026, but still not heading in the right direction, and earnings missed analyst predictions slightly.

The company's reliance on Apple Inc. NASDAQ: AAPL products means that as the larger company diversifies its partner base, Qualcomm faces a shrinking opportunity tied to future iPhone launches. Qualcomm now expects revenue related to Apple products to decline even more rapidly than previously expected.

Perhaps the company's biggest issue is not even related to a specific partner company, though. Memory inflation and supply chain costs are eating into handset demand and the company's margins, forcing Qualcomm to make significant price increases just to keep these factors under control.

Understandably, the market has reacted to these updates with volatility. After trading at about $250 per share in late May 2026, shares fell sharply before recently trading around the mid-$160s. Still, the analyst consensus sits somewhere between these two levels, with a QCOM price target of nearly $204 agreed upon across Wall Street.

There's Some Room Still in the Smartphone Business

Despite the bad news for Qualcomm's handset segment, it may not be worth writing it off entirely. The company's Snapdragon processors have become a primary on-device AI engine for Android phones, helping to process language models and other AI tools locally instead of via the cloud. Qualcomm has a strong position here and enjoys both pricing power and operational efficiency.

Automotive and AI Are Where the Long-Term Gains May Be Found

Although Qualcomm is well-known for its role in the smartphone industry, its automotive division could become the key focus as the company seeks to shift its strategic direction. Automotive revenue climbed by 61% YOY to nearly $1.6 billion for the latest quarter, a massive leap by any measure but especially impressive given that this may be only the beginning: Qualcomm anticipates annualized automotive revenue to reach $7 billion for the current fiscal year, thanks to major agreements with BMW OTCMKTS: BMWYY and Stellantis NV NYSE: STLA.

Back in June 2026, at its annual investor day, Qualcomm boosted its long-term non-handset revenue target for fiscal 2029 to $40 billion, almost double its previous target. Automotive is likely key to this projected growth, but the data center business is also significant. With custom silicon deals with hyperscalers and data center AI processors expected to ship in the coming months, Qualcomm is looking to continue its revitalization in one of the hottest markets currently available.

Qualcomm’s AI Case Needs Patience, Not NVIDIA Comparisons

Qualcomm trades at nearly 20x earnings, which actually makes it a value play compared to some higher-multiple offerings in the AI space. Still, despite this potential, investors will need to look past Qualcomm's struggles in the smartphone space, which may continue to weigh on the company in the short-term.

Qualcomm may not need to become the next NVIDIA Corp. NASDAQ: NVDA to succeed. Rather, the company's push into AI (via data centers) as well as automotive and other connected devices will need to offset the pressure it faces in its handset business. This may be a more manageable task and could end up rewarding investors willing to be patient through the low point of the current smartphone cycle.

In the end, the benefit could be longer-term diversification into multiple markets that have ample room for growth. However, this requires moving against Wall Street in some sense: analysts are split on QCOM shares, with most leaning toward Hold or Sell ratings, and the stock has an overall Hold rating despite its potential for upside going forward.

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