Qualcomm Inc

QUALCOMM Inc is mentioned in the context of the semiconductor sector's performance, particularly in relation to AI-driven demand and its impact on semiconductor manufacturers. The letter notes that 'AI-driven demand is prompting semiconductor manufacturers to expand capacity,' which includes companies like QUALCOMM Inc. However, there is no explicit bullish or bearish stance taken on QUALCOMM Inc itself.

Qualcomm is facing significant challenges, particularly due to its customer concentration with Apple, which is developing its own modem and moving away from Qualcomm silicon. Despite Qualcomm's efforts to diversify, including doubling its fiscal 2029 non-handset revenue goal to $40 billion and targeting $10 billion in automotive revenue, the company has been perceived as a loser in AI. The manager noted that Qualcomm's handset business is suffering from higher memory prices driving down phone demand. The decision to trim the position was based on it becoming oversized in the portfolio and the risk/reward profile no longer being attractive.

Qualcomm, a leading semiconductor and communications technology company, was the largest contributor for the quarter. Shares recovered as management indicated that the inventory adjustments and production constraints resulting from higher memory costs were progressing largely as expected and that handset revenues from Chinese customers were expected to reach a bottom. We believe Qualcomm’s technologies will continue to benefit as connectivity expands across devices and AI workloads increasingly extend from the cloud to the edge, supporting Qualcomm’s ability to generate strong levels of FREE cash flow in the long run.

Qualcomm's diversification strategy is gaining traction, as evidenced by their recent investor day where they doubled their fiscal 2029 non-handset revenue goal to $40 billion and lifted their automotive revenue target to $10 billion. They also secured a deal with Meta to supply data center CPUs for AI infrastructure, with production of their Dragonfly C1000 slated for 2028. Despite facing challenges from customer concentration in Apple, Qualcomm's strategic moves position it well for future growth in the AI sector, making it a compelling investment opportunity.

Qualcomm's diversification strategy is gaining traction, as evidenced by their recent investor day where they doubled their fiscal 2029 non-handset revenue goal to $40 billion and lifted their automotive revenue target to $10 billion. Additionally, Qualcomm struck a deal with Meta to supply data center CPUs for AI infrastructure, with production of its Dragonfly C1000 slated for 2028. Despite facing challenges with customer concentration in Apple, Qualcomm's efforts in AI and datacenter strategy position it well for future growth.

Qualcomm's position in the AI supply chain has come under scrutiny, leading to skepticism from investors. Despite the company outlining a medium-term plan to capture market share in custom chips, AI accelerators, and CPUs, the market remains doubtful due to Qualcomm's minimal share in these areas currently. This skepticism has negatively impacted its performance, making it a detractor for the portfolio this quarter.

Qualcomm (QCOM) is rapidly diversifying its business; its developer tools are accelerating edge AI functionality in new markets, driving demand for QCOM chips. We believe Qualcomm possesses the strategic flexibility required to capture the immense AI opportunity ahead. Notably, we believe Qualcomm is trading for an attractive 10 times earnings power once the new business kicks in.

Qualcomm Incorporated is mentioned in the context of portfolio changes, specifically as one of the largest sales during the recent quarterly rebalancing. However, there is no explicit argument made regarding its future performance or valuation.

The letter mentions Qualcomm as part of the portfolio's technology holdings that were trimmed due to significant stock price appreciation, indicating a neutral stance on the company's future performance.

Qualcomm is held due to its best-in-class Corporate Resilience score, scoring highly from Environment & Social factors as well as Governance. The stock is also well positioned from a sustainability opportunity perspective with high scores on Digital Infrastructure and Resource Efficiency. However, underperformance was driven by a sharp sell-off after record fiscal Q1 results were overshadowed by deeply disappointing forward guidance, as AI data center demand has created industry-wide memory shortages. Additionally, Apple's accelerating development of in-house modem chips threatens Qualcomm's largest customer relationship, and escalating US-China trade tensions create meaningful uncertainty around its substantial China revenue exposure.