Qualcomm shares rose 4% in premarket trading on Thursday after the smartphone-focused chipmaker signaled an AI-fueled rebound in demand, especially in China, after a two-year slump.
Sales to Chinese smartphone makers jumped 40% in the first
half of its fiscal year, the company said on Wednesday, as buyers there
gravitate toward higher-priced devices that can accommodate AI chatbots.
"Chinese vendors who traditionally relied more on
MediaTek, are going to start leveraging Qualcomm's high-end chips more as they
push hard into the AI Agenda," said IDC analyst Nabila Popal.
But Facebook-parent Meta warned on the cost of building new
services. An Intel said the AI boom was diverting spending away from its data
center chips.
"They further represent an upside for Qualcomm because
majority of the recovery is also going to be driven by Chinese OEMs this year,
coming from a tough last two years."
Qualcomm on Wednesday projected third-quarter sales that
were above estimates as it also benefits from its IoT (Internet of things) and
auto segments.
The company, the biggest supplier of smartphone chips, was
on course to add more than $8 billion to its market value based on premarket
movements. Other semiconductor firms such as Arm and Broadcom rose 2.8% and
2.4%, respectively.
According to preliminary data, opens new tab from research
firm IDC, in the high-end segment, the AI buzz and the foldable products
allowed the Android smartphone vendors to further differentiate themselves from
Apple and garnered increased interest from Chinese consumers in the first
quarter of 2024.
"We're optimistic that numbers can be driven higher,
given last year's muted Android cycle and the likelihood of IoT (internet of
things) improvement as inventory normalizes," analysts at Wolfe Research
said.
At least 14 analysts raised their price targets on Qualcomm,
according to LSEG data.
Qualcomm's shares have gained 13.5% this year following a
31.5% rise in 2023.
Shares of Apple, which is set to report earnings after
market closes on Thursday, were up 1.05% in premarket trading.
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