Qualcomm invests further in mobile AI with chip announcements

Qualcomm (QCOM) rolled out a number of key AI announcements today, as the company seeks to cement itself as a major player in mobile chips.

Those announcements include a new compute platform, called Snapdragon X Elite; a new central processing unit chip, called the Qualcomm Oryon CPU; and a new smartphone chip, named the Snapdragon 8 Gen 3.

Though Qualcomm makes chips, it doesn't produce the sought-after GPUs that have become standard for training AI models. That field is dominated by Nvidia (NVDA), though players like Intel (INTC) and AMD (AMD) are racing to catch up amid the GPU shortage.

Qualcomm, throughout the AI boom, has sought to carve out a niche that's linked to mobile and about increasing efficiency. The Snapdragon 8 Gen 3, Qualcomm's mobile platform for Android smartphones, was designed to emphasize generative AI — for example, offering the ability to run large language models, like Meta's (META) Llama 2.

The chip will begin appearing in major Android devices over the next few weeks, and will also bring enhanced gaming and audio features.

The company's Snapdragon X Elite compute platform is designed to give Windows computers an AI boost. Devices with Snapdragon X Elite aren't set to launch until the middle of 2024 — but the platform will feature a new chip that Qualcomm is expected to emphasize moving forward, the Qualcomm Oryon CPU.

According to Qualcomm, the Oryon CPU is faster than Arm-based (ARM) competitors, a group that includes Alphabet's Google (GOOG, GOOGL), Samsung, and TSMC. The chip purportedly matches the peak performances of both Apple's (AAPL) M2 chip and Intel's 13980Hx, with less power.

The product is an implicit shot at AMD and a multilayered stab at Intel, both of which use Arm intellectual property in some of their chips.

Despite the hype around semiconductors, Qualcomm shares have underperformed the S&P 500 this year. The company is wrestling with slowing smartphone sales and an increasingly competitive landscape.

"Near term, demand for handsets remains extremely depressed amid a severe channel inventory drawdown while orders from China Android manufacturers have yet to snap back," wrote CFRA analyst Angelo Zino, who rates the stock a Hold. "Although we like Qualcomm's potential to diversify over time, we are wary of its position given structural share loss across the Android ecosystem."

Qualcomm's partnership with Apple is also vital to its near-term prospects — and fragile, as Apple has chipmaking ambitions of its own. In September, Qualcomm and Apple re-upped an iPhone deal that sent Qualcomm's shares surging.

"The deal marks a second time that Apple has had to strike a multiyear contract to source thin modems from Qualcomm, in a contractual relationship that Apple sees as unfair but necessary," Argus Research director Jim Kelleher wrote in September. "For Qualcomm, the agreement locks up a key high-volume customer at a time when financial pressures and modest gains in smartphone function and efficiency are limiting demand for new phones."

Allie Garfinkle is a Senior Tech Reporter at Yahoo Finance. Follow her on X, formerly Twitter, at @agarfinks and on LinkedIn.

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