Abu Dhabi’s technology development hub, G42, is developing a 5-gigawatt AI campus and is reportedly exploring alternatives to Nvidia (NVDA), with Qualcomm (QCOM) emerging as a potential supplier of compute capacity. The move could help QCOM to close the gap with its semiconductor rival. Since this time last year, NVDA stock has surpassed QCOM, with a clear divergence commencing in April of this year — roughly around the time of Trump’s tariff announcement that left markets reeling.
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Since then, NVDA has continued to grow from strength to strength, while QCOM has lagged behind its rival and the broader market. For investors, the pairing of “Qualcomm” and “data center” may evoke bad memories. The company’s previous attempt—its Centriq server chips—failed, forcing it to exit the market in 2018. However, Qualcomm is a far stronger business today, powered by a robust cash-flow engine that can underwrite its renewed ambitions. On that basis, I lean cautiously Bullish on the stock.
More Than Just a Handset Story
Before we delve into Qualcomm’s second push into the data center market, it’s essential to understand its core business. The $170 billion-capped giant designs and licenses wireless communication technology, with its most significant revenue stream coming from mobile chips and the licensing of cellular patents. Thankfully, its third fiscal quarter 2025 results paint a picture of a company executing with precision. Total revenues jumped 10% to $10.4 billion.
However, making more money doesn’t mean much if you aren’t squeezing profits. In this vein, Qualcomm is also seeing impressive improvements in profitability, as evidenced by its net income climbing 25% versus FQ3 2024 to $2.666 billion. The ability to generate double-digit revenue growth and faster profit expansion, especially in the current economic climate, really speaks to the strength of Qualcomm’s business.
Qualcomm, known best for its handset segment, is seeing robust growth in its automotive (up 21% YoY to $984 million) and Internet of Things, or IoT (up 24% YoY to $1.681 billion) segments. Although its handset segment, powered by strong adoption of the Snapdragon 8 Elite platform, saw the least growth (up 7% YoY to $6.328 billion), it functions as the “cash cow” that is actively funding the company’s future.
A Tangible Shot at the Data Center Goal
Against this backdrop, Qualcomm’s ability to expand into new markets is critical for sustaining its long-term growth trajectory. Importantly, AI is no longer a distant “dream”—it’s here. Qualcomm’s Snapdragon platform is powering on-device AI, and the company recently noted that 70% of Galaxy S25 users actively engage with Galaxy AI, underscoring both the capability and efficiency of its chips.
Abu Dhabi’s G42 could serve as a near-term catalyst for Qualcomm’s push into data centers. The two companies already have established ties: G42’s subsidiary, Core42, is running Qualcomm’s Cloud AI 100 Ultra inference accelerators. If Qualcomm secures a major design win for G42’s flagship AI campus, it would mark a transformative step—positioning Qualcomm as a credible player in the vast AI infrastructure market and opening a new growth channel.
At the same time, Qualcomm is pursuing a hyperscale cloud partnership for its custom Oryon ARM-based CPUs, with the potential to pair them with Nvidia GPUs through the NVLink architecture.
A Healthy Dose of Skepticism for QCOM
Before getting carried away, it’s important to weigh the potential headwinds. Qualcomm’s failed Centriq venture serves as a reminder that the data center market is exceptionally difficult to crack, dominated by entrenched players such as Nvidia and AMD (AMD). The competitive landscape is further complicated by Qualcomm’s primary customers—hyperscale cloud providers like Alphabet (GOOGL) and Microsoft (MSFT)—who are simultaneously investing billions to build their own custom silicon.
Even within Qualcomm’s core handset business, risks persist. Key partners, such as Apple (AAPL), are pursuing vertical integration by developing in-house modem and processor technologies that could eventually displace Qualcomm’s offerings.
QCOM’s Relatively Attractive Valuation
Relative to peers, QCOM screens attractively on valuation and fundamentals. Its P/E ratio of 15.5 represents a roughly 45% discount to the broader Information Technology sector—an apparent disconnect given Qualcomm’s solid revenue and EPS growth profile. Should the company secure a meaningful AI-related design win that validates its position in the data center market, the stock could be poised for a significant rerating.
Is QCOM a Good Buy Now?
On Wall Street, QCOM carries a consensus Moderate Buy rating based on 11 Buy, six Hold, and one Sell rating in the past three months. QCOM’s average price target of $180.33 implies an upside potential of ~15% over the next 12 months.
Why the Market Is Too Pessimistic on QCOM
This time, Qualcomm’s AI data center ambitions appear to be different. The company has diversified well beyond handsets and demonstrated meaningful AI capabilities through its Snapdragon platform. Abu Dhabi’s G42 could prove a natural partner, as its subsidiary has already deployed Qualcomm’s technology.
Yet the stock still trades at a discount. Investors remain skeptical—not only of Qualcomm’s ability to re-enter the data center market after its prior failure, but also of the durability of its handset business. From my perspective, the market’s pessimism is overdone. Qualcomm’s revenue and EPS growth are underappreciated, while its AI initiatives effectively provide a “call option” on a major new growth avenue.
At current levels, QCOM appears compelling, despite the risks, supporting a cautiously Bullish stance.