Qualcomm gains on recovery in smartphone market

Demand has been particularly positive in major market China, from which Qualcomm gets almost half its revenue

Qualcomm shares gained 4% on Thursday after the chip designer’s strong quarterly revenue forecast fanned investor optimism about a China-led recovery in the smartphone market.

The company, the biggest supplier of smartphone chips, will add nearly $8 billion to its market value, if the gains hold.

It forecast both first-quarter sales and adjusted profit above market estimates on Wednesday, indicating the smartphone market was picking up after a tough 2023 as consumers upgrade devices for AI apps like chatbots and image generators.

Demand has been particularly positive in major market China, from which Qualcomm gets almost half its revenue, thanks to new smartphone launches by brands like Xiaomi, Oppo and Vivo.

This was a nice sign that the consumer was willing to spend on high-end cell phones, according to Ryan Detrick, chief market strategist at Carson Group.

Improvement in the Chinese market played a big role. Can that continue is the big question for investors, he said.

Qualcomm is trying to diversify its revenue as it prepares for the end of a lucrative tie-up with Apple, which is working on its own modem chips to replace those made by Qualcomm.

While the deal to keep selling chips to Apple is until at least 2026, focus is on whether Qualcomm’s efforts to break into laptops and AI in data centers will ramp up quickly enough to offset declines in Apple revenue.

Qualcomm is starting to enjoy additional revenue from the other markets it is focusing on including automotive, internet of things, headsets and personal computers, according to Bob O’Donnell, chief analyst at TECHnalysis Research.