Key Takeaways:
Qualcomm shares tumbled 6% on Wednesday, extending a two-day slide that has erased more than $20 billion in market value as a broad semiconductor rout deepened.
Qualcomm Inc. shares fell as much as 6% to a fresh intraday low near $192, joining a sector-wide selloff that dragged the Philadelphia Semiconductor Index down 2.1% as investors fled chip stocks on AI spending concerns. The Nasdaq 100 lost 1.1%, while the S&P 500 slipped 0.3%.
"The market is repricing semiconductor risk after Alphabet's $185 billion AI capex projection raised questions about returns on investment across the sector," said Stacy Rasgon, senior analyst at Bernstein.
The drop pushed Qualcomm's two-day decline to nearly 14% after an 8% rout on Tuesday. The broader selloff hit every component of the iShares Semiconductor ETF, which fell 7.9% on Tuesday alone. Memory-chip makers Sandisk and Micron each lost more than 13%, while ON Semiconductor and Marvell Technology fell 11% and 9.4%, respectively. Despite the pullback, the SOXX remains up more than 100% for 2026.
The selloff comes ahead of Qualcomm's Investor Day, where management is expected to outline data center revenue targets for 2027 and beyond. JPMorgan raised its price target to $265 last week, citing expectations for "significant data center revenue targets," but the broader market is questioning whether AI infrastructure spending can justify current valuations.
Mixed Fundamentals Beneath the Selloff
Qualcomm's core business remains solid in some areas and strained in others. The company reported second-quarter fiscal 2026 revenue of $10.6 billion and non-GAAP earnings per share of $2.65, both beating consensus estimates and extending a streak of eight consecutive quarterly EPS beats. Automotive revenue hit a record $1.33 billion, up 38% year over year, and combined automotive plus IoT grew 20%.
But handsets, still Qualcomm's largest revenue segment, fell 13% year over year. Operating income dropped 26%, reflecting acquisition integration costs and heavy investment in data center expansion. The company guided third-quarter revenue of $9.2 billion to $10 billion with earnings per share of $2.10 to $2.30, implying further sequential softness.
Why the Street Is Divided
The bull case hinges on Qualcomm's transformation beyond smartphones. The company closed its Alphawave Semi acquisition in the first quarter and is pursuing a roughly $4 billion deal for AI software startup Modular, which would give Qualcomm a credible alternative to Nvidia's CUDA platform through the MAX inference framework and Mojo programming language. A rumored $8 billion to $10 billion bid for Tenstorrent would add AI chip design capability.
Chief Executive Officer Cristiano Amon confirmed that a "leading hyperscaler custom silicon engagement is on track for initial shipments later this calendar year," opening a direct path into the data center market dominated by Nvidia Corp. and Advanced Micro Devices Inc.
The bear case is equally clear. Bank of America reiterated an underperform rating, arguing Qualcomm faces "hyper-competition in the AI data center market" with much of the upside already priced in. The consensus analyst price target stands at $183.83, below the current trading level. Insider selling and a GF Value estimate of $175.34 from GuruFocus add caution.
Investor Impact
Qualcomm trades at 21 times forward earnings with a PEG ratio of 0.958, a discount to semiconductor peers despite eight consecutive earnings beats and entry into two new multi-billion-dollar markets. The stock's 20.6% year-to-date gain still trails the SOXX's 100% advance, suggesting the market has yet to fully price Qualcomm's data center ambitions.
Micron Technology reports earnings Wednesday afternoon, providing the next major test for the semiconductor sector. A weak outlook could deepen the selloff; a strong report may restore confidence in AI-driven demand.
This article is for informational purposes only and does not constitute investment advice.
