Qualcomm CEO explains why the chips story is ‘probably as good as it gets’
Semiconductor stocks have had a rough few months, and Deutsche Bank recently released a report projecting that this earning season could reveal more signs of weakness.
Qualcomm (QCOM) CEO Cristiano Amon continues to project optimism about where demand for chips is headed — at least, long-term. He contends that the chip shortage that began at the onset of COVID-19 forced people beyond the industry to understand the importance of semiconductors. Qualcomm’s chips are in products as varied as mobile phones, laptops, connected cars, and VR devices.
“People realized chips are an essential ingredient for the digital economy and when they look at economic growth,” he told Yahoo Finance at Thursday’s Qualcomm Ventures CEO Summit. “When you think about the digital transformation of the enterprise, it’s necessary for companies that need to be more efficient. Chips become incredibly important for all of this because you need connectivity.”
In other words, he said, “The story about chips is probably as good as it gets.”
For now, the volatility of the stock market, high inflation and a hawkish Fed all pose challenges not only to Qualcomm, but to tech companies across the board — for instance, the Nasdaq 100 is down about 32% year-to-date as of Wednesday. Qualcomm’s revenue and earnings for the last quarter beat analysts’ expectations, and it’s set to report its Q4 earnings in early November. The company’s shares are down about 40% year-to-date.
“In the short-term, consistent with what we said in earnings, we have seen a little bit of a slowdown because of the macro,” said Amon.
As Qualcomm finds its way forward in the near-term, the company’s diversification strategy — initiated by Amon when he took the helm in 2021 — is front-and-center. For example, Qualcomm Ventures, the company’s VC arm, has been focused on investing in companies that build out Qualcomm’s ecosystem in forward-looking areas like VR, said Qualcomm Ventures Global Head Quinn Li.
Li says it’s a better time to invest than you might think.
“If you look at the last cycle, a lot of big companies actually started and grew in difficult times,” he said. “So, from an investor’s perspective, we have the capital to deploy and I think it’s probably a better time to invest than it was the same time last year… I don’t think it’s necessarily a bad time.”
A macro environment that’s impossible to ignore
Politics have also affected the overarching chips environment, as President Joe Biden recently rattled the industry by restricting chip exports to China. The move grabbed headlines, and Amon said he was concerned in the near-term as to how it might affect chip demand. However, that’s not the China-related situation that’s most top-of-mind for Amon.
“The other thing that’s happening right now is that China is in lockdown,” he said. “We’ve seen what’s happening in markets, and when you’ve got a lot of people locked down, you don’t go out and decide the best thing to do is buy a new phone. That has a huge impact on consumer spending.”
It doesn’t help that the headlines surrounding chip stocks haven’t been great lately. Last week, the Philadelphia Semiconductor Index fell more than 4% before rebounding — another tough day on an index that’s down more than 40% year-to-date.
“The macro component here, you just can’t ignore it,” Amon said.
Allie Garfinkle is a Senior Tech Reporter at Yahoo Finance. Follow her on Twitter at @agarfinks.
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