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Qualcomm: Undervalued Dividend Powerhouse Poised for AI-Driven Rebound in Semiconductors

In the fast-paced world of semiconductors, where artificial intelligence (AI) hype has propelled many stocks to dizzying heights, Qualcomm (NASDAQ: QCOM) stands out as a contrarian opportunity.

While the broader sector has enjoyed robust gains, Qualcomm's shares have lagged, declining about 3.8% year-to-date (YTD) as of August 12, 2025, compared to a 10.9% rise in the Nasdaq Composite Index and a nearly 20% surge in the VanEck Semiconductor ETF (SMH).

This underperformance has left the stock trading at around $153 per share, down from its earlier highs, prompting analysts to argue that it's undervalued, despite strong fundamentals, a reliable dividend track record, and strategic pivots into high-growth areas like AI and data centers.

Recent Earnings: Beats and Guidance Signal Resilience

Qualcomm's fiscal third-quarter results underscored its operational strength amid market volatility.

The company reported adjusted earnings per share (EPS) of $2.77 on revenue of $10.37 billion, surpassing analysts' expectations of $2.71 EPS and $10.35 billion in revenue. Despite this beat, the stock dipped nearly 8% in the immediate aftermath, reflecting investor concerns over its shifting business mix, particularly its reliance on modem supplies to Apple, which is expected to phase out Qualcomm's components in coming years.

Looking ahead, Qualcomm provided optimistic guidance for its fiscal fourth quarter (ending September 2025), projecting revenue between $10.3 billion and $11.1 billion, with EPS in the range of $2.85 to $3.05. This outlook suggests continued momentum, driven by diversification efforts.

For the full fiscal year 2025, management anticipates 12% revenue growth and 16% adjusted EPS growth, highlighting the company's ability to navigate headwinds like softening smartphone demand.

Key segment highlights from Q3 include:

• Handsets Business: Revenue of $6.33 billion, slightly below the $6.44 billion consensus, but still a core driver.

• Automotive and IoT: Growing areas, with Qualcomm emphasizing localization of module production in markets like India to support partners and expand reach.

• Overall Returns to Shareholders: Qualcomm returned $3.8 billion in Q3, including $967 million in dividends and $2.8 billion in share repurchases, reinforcing its capital allocation discipline.

Analyst Sentiment: Bullish on Long-Term Upside

Wall Street remains largely positive on Qualcomm, with a consensus "Buy" rating from 54 analysts and an average 12-month price target of $181.47, implying about 18% upside from current levels. Targets range from a low of $140 to a high of $225, reflecting varied views on execution risks but optimism around growth catalysts.

However, not all views are unanimous; some analysts have a "Hold" rating, citing near-term pressures from competition and macroeconomic factors. Investors should monitor upcoming events like the Snapdragon Summit on September 23-25, 2025, where Qualcomm will unveil the Snapdragon 8 Elite chip, facing direct competition from MediaTek's Dimensity 9500 launch a day earlier.

Diversification Strategy: Betting Big on AI and Data Centers

Qualcomm is actively reducing its dependence on smartphones, which still account for the bulk of revenue. Under CEO Cristiano Amon, the company is expanding into AI, data centers, and emerging technologies:

• AI and Neural Processing: Snapdragon chips are powering Meta's smart glasses and integrating neural processing units (NPUs) for efficient AI tasks. Qualcomm's push into data centers includes a May 2025 memorandum of understanding with Saudi AI firm Humain and an agreement to acquire Alphawave IP Group, expected to close in Q1 2026.

• Advanced Discussions: Amon revealed engagements with multiple customers, including "advanced discussions with a leading hyperscaler," with potential revenues starting in fiscal 2028.

• Wi-Fi 8 and Connectivity: In July 2025, Qualcomm highlighted Wi-Fi 8 advancements for ultra-high reliability and low-latency connectivity, crucial for mission-critical applications like industrial IoT and automotive.

• Oppenheimer Conference Insights: On August 12, 2025, Qualcomm discussed its automotive and IoT strategies, emphasizing investments in core technologies and semiconductors, with calls from Vietnam's Prime Minister for increased commitments in these areas.

These moves position Qualcomm to capitalize on the AI boom, where peers like Nvidia have dominated. However, revenues from data centers may not materialize until 2028, requiring investor patience.

Dividend Appeal: Getting Paid to Wait

For income-focused investors, Qualcomm's dividend is a standout feature. The current yield sits at approximately 2.4%, backed by two decades of steady growth. Over the past 20 years, reinvesting dividends has delivered a total return of over 480%, far outpacing the 270% price return alone.

This reliability makes Qualcomm attractive for "getting paid to wait" on growth catalysts. Compared to dividend ETFs like Vanguard Dividend Appreciation ETF (VIG) or ProShares S&P 500 Dividend Aristocrats ETF (NOBL), Qualcomm offers sector-specific exposure with higher yield potential, though diversification via ETFs may suit risk-averse portfolios.

Investor Takeaway: A Compelling Buy for Patient Portfolios

Qualcomm's blend of defensive dividends, earnings resilience, and offensive AI plays makes it a semiconductor stock worth considering for long-term investors. While near-term catalysts like the Snapdragon 8 Elite launch could spark a rebound, the real value lies in its undervalued position and growth trajectory. For those bullish on AI and connectivity, dipping in now—especially if it holds $145 support—could yield significant rewards. As always, consult financial advisors and diversify to manage risks in this volatile sector.

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