(Reuters) – Qualcomm shares rose 4% on Thursday after the chip designer’s strong quarterly revenue outlook boosted investor optimism about a China-led recovery in the smartphone market.
The company, the largest supplier of smartphone chips, will add about $8 billion to its market value if the gains continue.
It forecast first-quarter sales and adjusted earnings above market estimates on Wednesday, suggesting the smartphone market is rebounding after a difficult 2023 as consumers upgrade devices for artificial intelligence applications such as chatbots and image generators.
Demand has been particularly positive in key markets in China, where Qualcomm (NASDAQ:) takes nearly half of its revenue, thanks to new smartphone launches by brands like Xiaomi (OTC:), Oppo, and Vivo.
“This was a nice sign that the consumer was willing to spend on high-end mobile phones,” said Ryan Detrick, chief market strategist at Carson Group.
He added, “The improvement in the Chinese market played a big role. Can this continue is the big question for investors.”
Qualcomm is trying to diversify its revenue as it prepares for the end of a lucrative association with Apple (NASDAQ:), which is working on its own modem chips to replace those made by Qualcomm.
While the deal to continue selling chips to Apple is through at least 2026, the focus is on whether Qualcomm’s efforts to break into laptops and AI in data centers will ramp up quickly enough to offset the decline in Apple’s revenue.
“Qualcomm is starting to enjoy additional revenue from other focused markets including automotive, IoT, headsets and PCs,” said Bob O’Donnell, senior analyst at TECHnasis Research.
President-elect Donald Trump has put forward plans to impose comprehensive tariffs ranging from 10% to 20% on almost all imports, as well as tariffs of 60% or more on goods coming from China, in an attempt to boost manufacturing in the United States.
“Higher tariffs, if applied to chips coming from Taiwan, which I would be very surprised if that happens, would be an incentive for Qualcomm to move manufacturing to the United States,” O’Donnell said.
