Qualcomm is facing severe challenges in the consumer electronics market due to explosive memory demand driven by AI data center construction. Although the company's stock recently achieved its longest winning streak since 2018, this represents only a temporary pause in a significant downturn. Year-to-date, the stock has fallen more than 20%, ranking as the worst performer in the Philadelphia Semiconductor Index, with a 25% plunge in the previous quarter marking its worst quarterly performance since 2002.
Analysts project that fiscal 2026 revenue will show the first negative growth since 2023, while fiscal 2027 growth is expected to be only about 0.8%. These figures are far below the semiconductor industry's overall growth expectations of 56% and 28% for the same periods.
The core issue lies in soaring memory prices. Since late August of last year, the DRAM spot price index has surged nearly 500%, forcing Qualcomm's customers to reduce inventory as they cannot obtain sufficient memory chips at reasonable prices. Compounding these challenges, Apple's gradual phase-out of Qualcomm's modem chips has further pressured the company, with the stock having declined approximately 40% from its June 2024 peak.
Despite recent consecutive gains, the stock remains down 20% for the year. Qualcomm's shares are currently poised for a tenth straight day of gains, with an 11% rise over this period representing the best performance in nearly six months. The semiconductor sector has also been the second-strongest industry in the S&P 500 this year. However, Qualcomm's year-to-date decline of about 20% makes it the worst-performing component of the Philadelphia Semiconductor Index. The stock recently hit its lowest level since 2023 and has faced at least eight analyst rating downgrades this year.
Among the 45 analysts covering Qualcomm, only 17 maintain buy ratings, while three recommend selling. This represents the most pessimistic consensus since at least 2008. In contrast, AI-focused chipmakers like Nvidia, Broadcom, and Micron have buy ratings from over 90% of analysts. Kim Forrest, Chief Investment Officer at Bokeh Capital Partners, noted, "It was a momentum stock for a very long time, and when that halo disappears, it's very painful because you have to rethink what kind of investor is attracted to the company's fundamentals. It's a long, ugly process."
The root of Qualcomm's current difficulties is directly linked to the AI boom. Massive construction of AI data centers has dramatically increased demand for memory chips, creating supply constraints and high prices for consumer electronics manufacturers. Although the DRAM spot price index has retreated about 13% from its January peak, persistently high prices continue to fuel analyst pessimism about Qualcomm's growth prospects. In its last quarterly report, Qualcomm disclosed that some customers were reducing shipment plans specifically due to high memory chip costs. Ethan Feller, Equity Strategist at Zacks Investment Research, stated, "Memory shortage is a real near-term challenge, and with so many unknowns about the memory outlook, no one can say the worst is over. If we could confirm when memory supply and demand will improve, the stock might be attractive, but the growth picture for this year and next is not optimistic, which is clearly negative for market sentiment."
Faced with pressure in its core business, Qualcomm CEO Cristiano Amon previously indicated that the company is accelerating its transformation by expanding chip sales into automotive, personal computers, and data centers to build more diversified revenue streams. However, growth from these new businesses remains insufficient to offset declines in the smartphone market. Bloomberg Intelligence data shows analysts expect Qualcomm's fiscal 2026 revenue to decline by 0.8%, which would be its first annual contraction since 2023. Revenue growth for fiscal 2027 is projected at only about 0.8%. Meanwhile, Apple's decision to gradually eliminate Qualcomm modem chips continues to weigh on long-term prospects. Several years ago, market hopes that AI expansion beyond data centers would make Qualcomm a major beneficiary drove its stock to a record high in June 2024, but this expectation has yet to materialize.
Wall Street has grown increasingly cautious toward Qualcomm. JPMorgan downgraded the stock last week, while BNP Paribas also issued a downgrade, stating, "The memory price squeeze effect will likely extend into the first half of next year, and we see little chance for improvement in Qualcomm's near to medium-term outlook." The main argument supporting Qualcomm bulls is its relatively low valuation. The stock currently trades at about 12 times earnings, below its 10-year historical average of approximately 15 times, while the Philadelphia Semiconductor Index overall trades at about 22 times earnings. A few value-oriented investors remain optimistic. Steve Bruce, Chief Investment Officer at Bruce Wood Capital, commented, "The market has given Qualcomm quite a headwind, but it has executed reasonably well in a tough environment. These issues are widely known now and should be priced in. If memory prices retreat further, it would give the company more breathing room, and from a long-term perspective, the stock is attractive." However, until the memory supply situation becomes clearer, this argument has yet to gain broad market acceptance.
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