Day 1 – Why the opportunity is worth pursuing
- The Snapdragon-sponsored trek across the world to Maui has been completed with CEO Cristiano Amon explaining the “why” on Day 1, while he and his colleagues will explain the “how” over the next 2 days.
- This means that all of the new products and geeky specification comparisons that everyone gets so excited about will happen tomorrow and the day after, but the real story was told today.
- At the heart of Qualcomm’s proposition is the idea that the way that humans interact with technology is going to change from using many apps to interacting with a single agent on their devices.
- This will not be limited to smart glasses and vehicles but will quickly spread to all the digital devices that humans use.
- While AI Agents greatly improve the usability of Digital Life services in the vehicle and on smart glasses, the utility uplift on smartphones and PCs is less clear, which is why I am not yet convinced of AI Agents’ ubiquity.
- It is possible that the popularity of AI agents on glasses and in cars drives adoption in other device categories, but this remains just a theory
- Crucially for Qualcomm over the next few years, it doesn’t matter whether AI agents take off, as I do not think that it will materially influence the investment case in the company, which is predicated on diversification away from smartphones, which is happening with or without AI Agents.
- Hence, I see the trends outlined today as icing on the cake and, should they come to fruition, will serve to underpin higher earnings growth and a higher earnings multiple, making me a happier shareholder.
- Mr Amon highlighted several trends that underpin the notion that Qualcomm will become an essential enabler of AI services:
- First, AI Agents: which Qualcomm expects will become the main way humans interact with digital devices and that users will want to interact with one agent across all of the devices that they use.
- To make these agents fun, easy and useful, they need to run a large part of the service locally, meaning that processing of models on edge devices will become crucial.
- Second, Edge processing: where running models at the edge will make them more economical for the service provider and a more private, more secure, faster and more personalised agent for the user compared to running the whole service in the cloud.
- As a major supplier of processors to an ever-increasing range of these devices, it is clear how Qualcomm benefits as these trends unfold.
- In the meantime, Qualcomm’s presence in automotive, PCs, XR and other peripheral devices is clearly going to deliver growth as share in automotive and PCs remains relatively low, while XR is a nascent market with very high growth potential should it take off in a big way.
- Qualcomm was also quick to point out that in the wearables segment in particular, a horizontal approach (Android) is better than a vertical approach (iOS) as then users have more choices about the technology that they wear, where fashion is starting to become relevant.
- Furthermore, instead of bringing China to Hawaii, Snapdragon Summit has gone to China, with a simultaneous event, which makes a lot more sense.
- Maui is now quite hard to get to from China, and the geopolitical issues are making it harder for Chinese partners and developers to attend.
- Furthermore, the attendance at the China event is already over 1,000, making this a good idea and explaining the time of the keynote, which was 3 pm in Hawaii, corresponding to 9 am in Beijing.
- We now know why Qualcomm intends to pursue the opportunity for models running on edge devices, and what will follow in the next 2 days is how that opportunity will be addressed.
- Here I expect a series of updates, a widening of the portfolio to address other market segments and a lot of benchmarks showing just how much better these updates are.
- There is no revolution or paradigm shift here, but a steady execution of the articulated strategy that should deliver steady growth for several years to come.
- Steady and reliable growth is music to investors’ ears, and as such, I still hold Qualcomm and remain happy to do so.
