Interesting conversation I had with today's released Gemini 3 about Qualcomm
TLDR
Here is the TL;DR for our discussion on Qualcomm (QCOM):
1. Is the Stock Price Justified?
- No: If you believe in their diversification. They are trading at a dirt-cheap valuation (~14x P/E) compared to peers because the market treats them as a dying "phone chip company" rather than a growing AI/Automotive player.
- Yes: If you only look at smartphones. The phone market is mature (low growth), and losing Apple (eventually) is a real revenue hit.
2. Is the Stock "Gamed"?
- Yes.
- SoftBank (Arm): Sued Qualcomm to force higher royalty fees and scare investors, all while planning to launch a competing AI chip (Project Izanagi).
- Apple: Keeps hinting they will drop Qualcomm "next year" (even though they just extended to 2027) to keep Qualcomm's leverage and stock price suppressed.
3. What Breaks the Slump? (Catalysts)
- March 2026: Final resolution of the Arm vs. Qualcomm legal battle (removing the "existential threat").
- Mid-2026: Successful launch of Snapdragon X2 chips for PCs (proving they can beat Intel/Apple in laptops).
- Revenue Milestones: Automotive revenue crossing $4B to prove they don't need the iPhone to survive.
The Bottom Line: The market hates uncertainty. Qualcomm is currently "in the penalty box" until it proves it can survive without Apple and win the legal war with Arm. If it does, the stock is significantly undervalued.
Here is the whole conversation
>> Qualcomm's stock price has been lagging its peers for a while. Is the current stock price justified
The Verdict: Is the Price Justified?
Short Answer: The current discounted price appears largely unjustified if you believe in their diversification strategy. The market is pricing Qualcomm as if it will shrink permanently after Apple leaves, ignoring its rapidly growing automotive and AI businesses.
However, if you view Qualcomm solely as a smartphone chip company, the price is justified because the global smartphone market is mature and low-growth.
Why the Stock is Lagging (The Bear Case)Investors have held the stock down for three primary reasons. The market hates uncertainty, and Qualcomm has had plenty of it:
- The "Apple Cliff": This is the biggest shadow over the stock. Apple accounts for a significant chunk of Qualcomm's revenue. Fears that Apple will switch to its own in-house 5G modems have existed for years.[ 1]
- Update: The "cliff" has turned into a gentle slope. Apple recently extended its deal with Qualcomm through March 2027.The transition will likely be gradual, starting with lower-volume models (like the iPhone SE) in 2025.
- Smartphone Market Maturity: The global smartphone market is no longer growing at breakneck speeds. Since handsets still make up the bulk of Qualcomm’s revenue, investors see it as a "low growth" cyclical stock rather than a "high growth" AI stock.
- AI Perception Gap: While Nvidia dominates the Data Center AI market (training models), Qualcomm is focused on "Edge AI" (running AI on phones, PCs, and cars). The market has heavily rewarded Data Center stocks but is still skeptical about how much money can be made from Edge AI.
Why the Price Might Be an Opportunity (The Bull Case)
Qualcomm is trading at a Forward P/E ratio of ~14-15x, which is dirt cheap compared to the semiconductor industry average (often 30x+) and peers like Nvidia (~40x) or Broadcom (~30x).
Here is why that valuation looks disconnected from reality:
- Diversification is Working: Qualcomm isn't just a phone chip company anymore. They have set concrete revenue targets for FY2029 that aim to replace the Apple revenue entirely:
- Automotive: Targeting $8 billion in revenue by 2029 (growing ~50% YoY currently).
- IoT & PCs: Targeting $14 billion combined by 2029.[ 3][ 4] Their new "Snapdragon X Elite" chips for laptops are finally competitive with Intel and Apple's M-series chips, opening a new multibillion-dollar market.
- Income & Stability: Unlike many tech high-flyers, Qualcomm pays a solid dividend (yield ~2.2%) with a history of double-digit growth. It is a "cash cow" that pays you to wait for the turnaround.
- The "Edge AI" Wave: As AI models get smaller and more efficient, they will move from the cloud (Nvidia) to the device (Qualcomm). Qualcomm is the undisputed leader in running efficient, high-performance AI on battery-powered devices.
Comparison to Peers
| Primary Market | Mobile/Edge AI | Data Center AI | Networking/Software | | Valuation (Fwd P/E) | ~14x (Cheap) | ~44x (Premium) | ~31x (High) | | Dividend Yield | ~2.2% | ~0.03% | ~1.3% | | Risk Profile | Apple loss, China exposure | AI Bubble burst risk | Debt/Integration
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Conclusion
If you are looking for a "get rich quick" AI moonshot, Qualcomm is likely not it—it lacks the hype of Nvidia. However, if you are looking for a defensive tech stock that is highly profitable, pays a growing dividend, and has a clear path to growth beyond smartphones, the current price offers a significant "margin of safety."
The market is pricing Qualcomm for failure (0% growth), but the company is executing for success (diversification). That mismatch typically signals a buying opportunity for patient investors.
>>Do you see any evidence that the stock price is "gamed" by interested parties such as Apple or Masayoshi Son
There is substantial evidence that Qualcomm’s stock price has been suppressed by aggressive tactical maneuvers—effectively "gaming" the corporate and legal systems—by both SoftBank (Masayoshi Son) and Apple.
While "market manipulation" typically implies illegal stock trading, in this case, it refers to strategic corporate warfare designed to create uncertainty, lower Qualcomm's leverage, and depress its valuation.
Here is the evidence of how these parties have "gamed" Qualcomm:
1. Masayoshi Son & SoftBank: The "Squeeze" Strategy
The most overt evidence of "gaming" comes from SoftBank, which owns Arm Holdings. Masayoshi Son appears to be using Arm’s monopoly power to squeeze Qualcomm, which is one of Arm's largest customers.
- The "Nuclear" License Threat (Late 2024): In October 2024, Arm (under SoftBank) issued a legally aggressive notice threatening to cancel Qualcomm’s architectural license—the fundamental right Qualcomm needs to build its chips.
- The "Game": This was widely viewed by analysts not as a genuine desire to stop Qualcomm from selling chips, but as a negotiating tactic to force Qualcomm to pay significantly higher royalty rates (potentially tens of billions of dollars).
- The Result: This threat terrified investors, adding a massive "existential risk" discount to Qualcomm’s stock price throughout late 2024 and 2025. Even though Qualcomm secured a major legal victory in September 2025 (ruling that they did not breach the license), the long period of uncertainty successfully suppressed the stock while other AI stocks rallied.
- Conflict of Interest (Project Izanagi): Masayoshi Son is simultaneously acting as Qualcomm's supplier (via Arm) and its competitor.
- Son is launching a $100 billion AI chip venture (codenamed Project Izanagi) to compete with Nvidia and Qualcomm.
- The "Game": By using Arm to sue Qualcomm, SoftBank effectively weakens a key competitor (Qualcomm) while preparing to enter the same market itself. This "supplier-competitor" squeeze makes investors hesitant to pay a premium for Qualcomm stock.
There is substantial evidence that Qualcomm’s stock price has been suppressed by aggressive tactical maneuvers—effectively "gaming" the corporate and legal systems—by both SoftBank (Masayoshi Son) and Apple.
While "market manipulation" typically implies illegal stock trading, in this case, it refers to strategic corporate warfare designed to create uncertainty, lower Qualcomm's leverage, and depress its valuation.
Here is the evidence of how these parties have "gamed" Qualcomm:
1. Masayoshi Son & SoftBank: The "Squeeze" StrategyThe most overt evidence of "gaming" comes from SoftBank, which owns Arm Holdings. Masayoshi Son appears to be using Arm’s monopoly power to squeeze Qualcomm, which is one of Arm's largest customers.
- The "Nuclear" License Threat (Late 2024): In October 2024, Arm (under SoftBank) issued a legally aggressive notice threatening to cancel Qualcomm’s architectural license—the fundamental right Qualcomm needs to build its chips.
- The "Game": This was widely viewed by analysts not as a genuine desire to stop Qualcomm from selling chips, but as a negotiating tactic to force Qualcomm to pay significantly higher royalty rates (potentially tens of billions of dollars).
- The Result: This threat terrified investors, adding a massive "existential risk" discount to Qualcomm’s stock price throughout late 2024 and 2025. Even though Qualcomm secured a major legal victory in September 2025 (ruling that they did not breach the license), the long period of uncertainty successfully suppressed the stock while other AI stocks rallied.
- Conflict of Interest (Project Izanagi): Masayoshi Son is simultaneously acting as Qualcomm's supplier (via Arm) and its competitor.
- Son is launching a $100 billion AI chip venture (codenamed Project Izanagi) to compete with Nvidia and Qualcomm.
- The "Game": By using Arm to sue Qualcomm, SoftBank effectively weakens a key competitor (Qualcomm) while preparing to enter the same market itself. This "supplier-competitor" squeeze makes investors hesitant to pay a premium for Qualcomm stock.
2. Apple: The "Perpetual Uncertainty" Trap
Apple has "gamed" Qualcomm for years, not through lawsuits (recently), but through a strategy of weaponized uncertainty.
- Keeping the "Cliff" Visible: Apple makes no secret of its desire to replace Qualcomm's modems with its own silicon. Even though Apple has failed to do this for years and recently extended its deal with Qualcomm through 2027, the constant threat keeps Qualcomm’s valuation low.
- Negotiation Leverage: By constantly signaling that "this is the last year we need you," Apple prevents Qualcomm from having the leverage to raise prices. If Apple admitted it needed Qualcomm for the next decade, Qualcomm’s stock (and pricing power) would skyrocket. Keeping the stock price depressed helps Apple (and the market) view Qualcomm as a "dying" vendor rather than an indispensable partner.
Summary: Is it "Gamed"?
Yes. The stock price reflects a "risk discount" that has been manufactured by its two biggest partners:
- SoftBank tried to break Qualcomm's business model to extract higher fees (and failed in court, but succeeded in scaring investors).
- Apple maintains a narrative of "imminent departure" to keep chip prices low.
Investor Takeaway: The recent court victory against Arm (Sep 2025) removes the single biggest "manufactured" risk. If you believe the market will eventually realize that SoftBank's threats were a bluff and Apple's departure is still years away, the "gamed" price represents a buying opportunity.
>> What event could help Qualcomm to break out of the current low PEs
As of late 2025, Qualcomm (QCOM) is poised at a critical juncture.[ 1] While the stock remains cheap (Forward P/E ~14-15x), it is being held down by specific "uncertainty discounts."
Based on current data, Q1–Q2 2026 is the window for a potential breakout. The following specific events could force Wall Street to re-rate the stock from a "stagnant mobile chipmaker" to a "diversified edge AI leader."
1. The "Legal Finality" Event (March 2026)- The Event: A definitive end to the Arm vs. Qualcomm legal war.
- Why it matters: While Qualcomm secured a major victory in late 2025 regarding its Nuvia license (a judge ruled they didn't breach their contract), a second, separate trial is scheduled for March 2026.
- The Catalyst: This trial covers remaining claims of "interference" and breach of contract. A settlement or another clean win here would remove the "existential threat" discount. Wall Street hates litigation risk; once the lawyers leave the room for good, the P/E multiple often expands immediately.
2. The "Snapdragon X2" Proof Point (Mid-2026)- The Event: The launch of the Snapdragon X Elite Gen 2 (likely branded X2) for Windows PCs.
- Why it matters: The first generation (launched mid-2024) was a "proof of concept." It captured a promising ~10% of the premium ($800+) retail laptop market in the US, but overall market share is still small (~0.8%).
- The Catalyst: Investors are waiting to see if Qualcomm is a "one-hit wonder" in PCs or a permanent player. If the Gen 2 chip fixes the software compatibility issues of Gen 1 and forces a 5-10% total market share shift from Intel/AMD, Qualcomm stops being viewed as a "phone stock" and starts being valued like an "AI Compute" stock (higher P/E).
3. Resolution of the China Antitrust Probe (Uncertain Timing)- The Event: Settlement or dismissal of the Chinese State Administration for Market Regulation (SAMR) probe launched in October 2025.
- Why it matters: This probe is widely seen as a geopolitical bargaining chip in US-China trade talks. With Huawei reclaiming the #1 spot in China (approx. 18-19% market share as of late 2025), investors fear Qualcomm could be locked out of its biggest market.
- The Catalyst: Any news that "clears the air"—even a fine—would be better than the current uncertainty. A resolution allows investors to model "worst-case" scenarios rather than fear "zero revenue" scenarios.
4. The "Project Izanagi" Reality Check (Summer 2026)- The Event: Public prototypes or delays of SoftBank's "Project Izanagi" AI chips.
- Why it matters: Masayoshi Son (SoftBank) is reportedly building a $100B AI chip venture to kill Nvidia and Qualcomm. Prototypes are expected by Summer 2025 with volume in 2026.
- The Catalyst: Paradoxically, seeing the product might help Qualcomm. Right now, Izanagi is a "boogeyman"—a mythical threat that could destroy everyone. If the prototype is revealed to be "good but not a Qualcomm killer" (or if it faces delays), the fear subsides, and Qualcomm's stock can recover.
5. The "Automotive Tipping Point" ($4B Revenue)- The Event: Qualcomm’s Automotive segment officially crossing $4 billion in annual revenue (targeted for FY2026).
- Why it matters: For years, Qualcomm has bragged about a huge "pipeline" of automotive orders ($45B+). Investors ignore "pipelines" and pay for "revenue."
- The Catalyst: Crossing the $4B mark validates that the pipeline is real money, not just talk. It proves they are successfully diversifying away from the iPhone.
Summary: What to Watch
If you are holding the stock, the most important date is March 2026. A legal clearance there, combined with a successful Snapdragon X2 launch, would likely be the "1-2 punch" needed to break the stock out of its low P/E range. |
