The Overlooked Part of the AI Chip Boom Is Getting a Closer Look

The rollout of artificial intelligence (AI) software over the past two years has led to a boom in those who create the software, as well as the hardware needed to run it. For the most part, the rollout has been based on cloud-based or computer services.

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  • However, the next iterations of AI will succeed because they’ll be usable on all sorts of devices, including mobile ones. That could mean a surge in chips capable of powering AI programs on smartphones.

    In this space, the likely winner is Qualcomm (QCOM). They manufacture chips for wireless communications, which will be critical for powering AI software on mobile devices.

    Qualcomm shares have been lagging the chip space, but they’re now up 25 percent over the past year, about in-line with the overall stock market.

    But shares are still inexpensive at 16 times forward earnings. Plus, Qualcomm grew revenues by 24 percent last year. With AI technology still in the early stages of rolling out, shares may have a few market-beating years ahead.

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  • Action to take: Investors may like shares here or on any drop lower. At current prices, Qualcomm also pays a 2.1 percent dividend.

    For traders, shares likely have more upside in the months ahead. The June $165 calls, last trading for about $7.40, can likely see mid-double-digit returns or better before expiration.


    Disclosure: The author of this article has a position in the company mentioned here, but does not intend to further trade after the next 72 hours. The author receives no compensation from any company mentioned in this article.

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