Qualcomm vs. Broadcom: Which is the Better Stock?

Qualcomm and Broadcom: An Overview

Qualcomm Technologies Inc. and Broadcom Inc. are prominent semiconductor companies specializing in wireless communication technologies, including 5G connectivity and mobile processors. Qualcomm provides chip designs for mobile devices, PCs, XR (Extended Reality), automotive, wearable, robotics, connectivity and AI (Artificial Intelligence). The company possesses an intellectual property portfolio encompassing 3G, 4G, 5G and other technologies.

Broadcom focuses on digital and mixed-signal complementary metal oxide semiconductor-based devices and analog III-V-based products. Its semiconductor solutions are used in enterprise and data center networking, home connectivity, set-top boxes, broadband access, telecommunication equipment, smartphones and base stations, data center servers and storage systems, factory automation, power generation and alternative energy systems and electronic displays.

With AI growth in PCs, smartphones, automotive and IoT applications, both Qualcomm and Broadcom can meet the demands of business enterprises.

Qualcomm's Position

Qualcomm is focusing on transitioning from a wireless communications firm for the mobile industry to a connected processor company. It introduced the Qualcomm X85 5G Modem-RF, powered by Qualcomm’s 5G AI Processor, designed to deliver 5G connectivity to Android users. This solution is gaining traction from network operators.

Qualcomm is expanding its Snapdragon G Series portfolio with gaming chipsets, including Snapdragon G3 Gen 3, Snapdragon G2 Gen 2 and Snapdragon G1 Gen 2 chips. Samsung has used the Snapdragon 8 Elite Mobile Platform for its premium devices. Qualcomm is also developing chipsets for AI PCs and has agreed to acquire MovianAI to enhance its AI research.

Despite AI efforts, Qualcomm faces competition from Intel in the AI PC market. Competition also comes from Samsung’s Exynos processors and MediaTek in the smartphone market, as well as Broadcom. Qualcomm’s operations in China may be affected by U.S.-China trade tensions.

Broadcom's Strengths

Broadcom benefits from demand for its networking products and custom AI accelerators (XPUs). Its next-generation XPUs are in 3 nanometers and will be the first to market in that process node. Broadcom expects volume shipment of these XPUs to hyperscale customers in the second half of fiscal 2025. The company anticipates opportunities in the AI space as hyperscalers develop their XPUs.

Broadcom has been acquiring companies to diversify beyond semiconductors and strengthen its presence in infrastructure software. Acquisitions of CA and Symantec’s enterprise security business have expanded its market. The acquisition of LSI Corporation diversified its business into the storage chip market. The addition of Brocade has allowed Broadcom to enter the FC SAN market, while the acquisition of VMware has benefited Infrastructure software solutions.

Broadcom faces competition in its markets, leading to pricing pressure. It faces competition from Skyworks in the FBAR technology market, and the acquisition of Brocade makes it a direct competitor of Cisco in the FC SAN market. Broadcom’s acquisitions have increased integration risks.

Financial Estimates and Performance

The Zacks Consensus Estimate for Qualcomm’s 2025 sales and EPS indicates growth. The EPS estimates have been trending upward.

The Zacks Consensus Estimate for Broadcom’s 2025 sales suggests growth, while that for EPS implies a rise. The EPS estimates have been trending upward.

Over the past year, Qualcomm has declined, while Broadcom has gained.

Qualcomm appears more attractive than Broadcom from a valuation perspective. Qualcomm’s shares trade at a lower forward earnings multiple than Broadcom.

Both Qualcomm and Broadcom carry a Zacks Rank #3 (Hold).

Conclusion

Both companies expect their sales and profits to improve in 2025. Broadcom has shown revenue and EPS growth, while Qualcomm has faced challenges. With price performance and long-term earnings growth expectations, Broadcom is better positioned than Qualcomm, although it is more expensive in terms of valuation. Broadcom seems to be a better investment option.

Global semiconductor manufacturing is projected to grow.