Qualcomm (QCOM) shares surged 11% to close at $213.93 on Thursday, after the company disclosed that a leading hyperscaler will receive its custom AI chips later this year. The stock touched an intraday high of $223.58, lifting its market capitalization to approximately $229 billion. The move reignited investor interest in Qualcomm as a potentially undervalued player in the AI hardware space.
Hyperscaler Deal and Investor Day
Qualcomm’s disclosure that a major cloud provider will receive its custom AI chips later this year has become a key talking point among investors. The company is expected to provide further details at its investor day on June 24. CEO Cristiano Amon described the customer as a “large hyperscaler” and emphasized a “multi-generation engagement,” highlighting Qualcomm’s expanded portfolio of CPU, accelerator, and custom ASIC offerings.
Valuation Debate Heats Up
The news has sparked a debate about Qualcomm’s valuation. On one hand, analysts at 24/7 Wall St. argue that Qualcomm is trading at roughly 16 times forward earnings with a free-cash-flow yield of 6.52%, far cheaper than peers like Nvidia, Broadcom, and AMD. They contend that investors are still pricing Qualcomm as an old-line modem maker rather than an AI silicon player. On the other hand, Simply Wall St. cautions that after a 24% gain this week and a 47% surge over the past month, the stock may already be pricing in significant growth. The popular fair-value target of $300 per share is cited, but risks tied to modest revenue growth and softer net income projections remain.
Fiscal Q2 Results
Qualcomm’s fiscal second-quarter results provided ammunition for both bulls and bears. Revenue reached $10.6 billion, with non-GAAP earnings per share of $2.65. The company highlighted record QCT Automotive revenue and a 20% jump in combined automotive and IoT revenue. Share buybacks totaled $5.4 billion in the first half of fiscal 2026.
Competitive Landscape
The competitive dynamics in the AI chip market are shifting rapidly. Nvidia remains the dominant player, while AMD’s recent guidance sparked a global semiconductor rally. Broadcom is a leading provider of custom silicon. Bob O’Donnell, president and chief analyst at TECHnalysis Research, noted that Qualcomm is expanding its data-center lineup from a small base, pointing to a “maturation” in the company’s strategy.
Smartphone Segment Concerns
However, Qualcomm’s handset segment remains a significant concern. The company projected revenue between $9.2 billion and $10 billion for the current quarter, below Wall Street’s expectations. Smartphone makers are grappling with higher memory chip costs, and Apple’s efforts to develop its own modem chips could threaten a major revenue source. J.P. Morgan analysts warned that the smartphone sector is “hardly out of the woods.”
Outlook
All eyes are on Qualcomm’s June 24 investor day. For the valuation gap to close, the company needs to deliver customer names, revenue figures, and evidence that its automotive and data-center chips can offset handset volatility. Without that, Thursday’s rally may be just a speculative bet on a business Qualcomm is only beginning to quantify.
