Qualcomm (QCOM) has underperformed the chip sector with a modest 28% return over five years, but the company is betting on a massive shift toward AI chips to reignite growth. Its current price-to-earnings ratio of 20 and PEG ratio of 0.58 suggest deep undervaluation compared to peers like Nvidia and AMD, though near-term challenges persist.
AI Expansion Beyond Smartphones
Qualcomm is diversifying beyond its core handset business, which still accounts for over two-thirds of revenue. The company's non-handset revenue target for fiscal 2029 has been doubled to $40 billion, signaling a major push into AI data centers, humanoid robots, and wearables. Its Snapdragon ARI Gen 1 processor already powers Meta Platforms’ smart glasses, positioning Qualcomm for a potential breakout if the AI glasses market takes off.
Data center chip demand remains strong, providing an immediate growth driver. However, mainstream adoption of AI glasses and humanoid robots is unproven, and the handset segment declined 13% year over year in fiscal 2026's second quarter. Still, Qualcomm's aggressive targets imply confidence in a multiyear tailwind.
Valuation vs. Reality
Qualcomm's cheap valuation reflects recent struggles: revenue fell 3% year over year in the latest quarter, and market share has slipped. By contrast, Nvidia and AMD boast far higher growth rates. If Qualcomm can accelerate its AI chip rollout, the low PEG ratio could become a bargain. Higher iPhone sales may also boost handset revenue in the near term, but the real long-term story hinges on non-handset success—especially in AI infrastructure.
The stock's current price assumes continued stagnation, but recent strategic moves challenge that view. With AI data center chips flying off shelves and a strong partnership with Meta, Qualcomm has multiple paths to a rebound. The key question is execution speed.