Investing.com – President Capital Management downgraded Qualcomm Incorporated (NASDAQ:) stock, citing mounting challenges including regulatory risks, Apple’s shift to home-grown 4G/5G modem chips, a slowdown in its licensing business (QTL), and weakness in the AI PC segment.
Apple’s move to its own modem chips will significantly erode Qualcomm’s profits in the coming years, the note said. With Apple (NASDAQ:) historically representing a substantial portion of Qualcomm’s revenue, the impact is expected to increase as the tech giant further reduces its dependence on third-party suppliers.
Although Qualcomm is working to diversify its revenue streams as it prepares for the end of its lucrative partnership with Apple.
However, the company’s QTL licensing business is also showing signs of slowing down. While the high-end smartphone market remains robust, future licensing profits are increasingly dependent on growth in the automotive and IoT sectors.
Despite these challenges, Qualcomm shares are up about 14% this year. It was trading at $165 on Tuesday. The San Diego-based company remains the largest supplier of smartphone chips, benefiting from a recovery in the smartphone market as consumers upgrade devices for artificial intelligence applications such as chatbots and image generators.
Earlier this month, Qualcomm set its fiscal first-quarter revenue target at $10.9 billion, with expected earnings per share of $2.95. This period includes the holiday shopping season in key markets such as the US and Europe, signaling optimism about near-term demand despite looming headwinds.
