What Happened?

Shares of wireless chipmaker Qualcomm (NASDAQ:QCOM) fell 6.2% in the morning session after the company announced its plans to diversify from the smartphone market by the end of the decade during its IoT and Automotive Diversification Investor Day event. However, the stock's reaction suggests markets are struggling to digest the short-term hit to revenues as Qualcomm shifts its focus from producing chips for the smartphone market—including big players like Apple. Qualcomm added that Apple could stop buying its chips as early as 2027. 

Some Wall Street analysts have weighed in on the update. Susquehanna analyst Christopher Rolland added, "We continue to have confidence in CEO Amon's ability to move Qualcomm beyond a modem and cellular IP company to become a true broad-based semis player… That said, if there was one knock, we think the loss of Apple will weigh until 2027." 

Additionally, there could be concern about Qualcomm's ability to meet some of the new milestones it has set for itself. To generate an additional $22 billion in yearly revenues by 2029, Qualcomm is expanding its target markets to include segments such as personal computing, automotive, industrial devices, and extended reality. Notably, an additional $4 billion in revenue is expected from the personal computing market, where Qualcomm will have to compete for market share with Intel and AMD. 

Overall, while the projections are optimistic, the market seems to be struggling to understand the potential impact of the new strategy on the business.

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What The Market Is Telling Us

Qualcomm’s shares are somewhat volatile and have had 10 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business. 

The biggest move we wrote about over the last year was 7 months ago when the stock gained 10% on the news that the company reported first quarter results that exceeded analysts' EPS expectations. Next quarter's revenue guidance came in higher than Wall Street's estimates. On the other hand, its inventory levels increased. Overall, this quarter's results seemed fairly positive and shareholders should feel optimistic.

Qualcomm is up 9.6% since the beginning of the year, but at $153.75 per share, it is still trading 32.3% below its 52-week high of $227.09 from June 2024. Investors who bought $1,000 worth of Qualcomm’s shares 5 years ago would now be looking at an investment worth $1,796.

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