Qualcomm’s Forecast Exceeds Estimates as AI Drives Chip Sales in China

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Qualcomm has forecasted quarterly sales and adjusted profit above Wall Street expectations, driven by increased demand for chips in Android smartphones with artificial intelligence features. After experiencing a smartphone slump last year, Qualcomm highlighted a resurgence in China’s Android market, particularly in the sale of higher-priced devices capable of accommodating AI chatbots.

The company reported a 40% growth in sales to Chinese smartphone makers in the first half of its fiscal year, indicating a recovery in that market. Qualcomm’s CEO, Cristiano Amon, emphasized the importance of AI in driving silicon content in smartphones, leading consumers to prefer more capable devices.

Despite competition from Huawei Technologies, Qualcomm’s position in the Chinese smartphone market seems to be benefiting from the trend toward more capable devices. The company’s forecast for the third quarter, with midpoints of $9.2 billion in sales and $2.25 per share in adjusted profit, exceeded analyst estimates.

While Qualcomm supplies chips to major smartphone manufacturers like Apple and Samsung, its optimism about the recovery in China’s smartphone market may not extend to Apple’s iPhone. Apple is expected to report a decline in revenue, primarily due to competition from Huawei and other companies offering cheaper smartphones in China.

Although Qualcomm remains optimistic about consumer demand for devices capable of running AI chatbots, its upcoming release of a chip designed for laptops may not significantly impact third-quarter results. However, the company’s overall chip segment is expected to perform well, with strong demand across various product categories, including automotive and Internet-of-Things chips.

In summary, Qualcomm’s positive outlook for the smartphone market, particularly in China, coupled with strong demand for its chips across multiple sectors, suggests a promising trajectory for the company’s future performance.