Hedge Funds Are Now Bullish on QUALCOMM Incorporated (QCOM)

We recently made a list The 10 Best Self-Driving Car Stocks to Buy Now. In this article, we take a look at how QUALCOMM Incorporated (NASDAQ:QCOM) compares to other autonomous car companies.

Advances in artificial intelligence, data analytics, and machine learning are shaping the way industries operate today. These three technological advances have increased the potential of autonomous vehicles and advanced driver assistance systems (ADAS).

But are consumers ready to put their hands off the wheel and trust autonomous vehicles? Let’s take a look at how the autonomous driving industry is evolving, with almost all major automakers investing significantly to get their Full Self Driving (FSD) cars on the road.

Global Autonomous Vehicle Industry

According to a report by Mordor Intelligence, the global autonomous vehicle market is valued at USD 41.10 billion in 2024. The market is expected to grow at a compound annual growth rate of 22.75% to reach USD 114.54 billion by 2029. The COVID-19 pandemic has hampered the overall production of the automotive industry, thereby delaying the production and implementation of autonomous cars. Moreover, tightened government regulations aimed at ensuring road safety have also proven to be a barrier for automakers. However, with the significant improvement in AI-powered software and hardware technologies, we are seeing automakers launching their Level 2 and Level 3 autonomous cars on public roads.

For example, on June 25, CNBC reported that Waymo, a leading autonomous vehicle company, opened its self-driving robo-taxis to users in San Francisco. The company says more than 300,000 people have signed up for the service. To keep up with the growing number of users, Waymo One has deployed a fleet of 300 cars in the city.

According to a study by McKinsey & Company, automotive market leaders believe that the autonomous segment is less fragmented due to the complexity and investment involved in its operations. According to the study, 15% of respondents believe that in the future, most companies in North America will work and implement autonomous technology. In contrast, 38% of respondents believe that the European market is led by two or three companies at most.

Regionally speaking, China and North America are leading the race to become the first countries to pilot Level 4 highway technology. Survey respondents are evenly split, with 58% believing each country has the potential to be first with Level 4 technology.

As mentioned above, developing and deploying autonomous vehicles requires a huge investment in software technology. However, the investment is also expected to yield high margins. The study found that experts believe that autonomous vehicle software will have an average margin of 15%, with hardware technology adding another 10% to the margin, making the autonomous vehicle segment a lucrative venture for automotive companies.

The Latest Trends in the Autonomous Vehicle Industry

New trends in the autonomous vehicle industry are paving the way for achieving Level 5 autonomy. Some of the latest developments in the industry include the use of the Internet of Things (IoT) to enable vehicles to connect with other vehicles, their surroundings, and the internet. This not only improves vehicle safety by providing rapid data collection and analysis to make timely decisions based on changes in traffic. New sensor technologies such as LiDAR scan the surroundings of the car using laser technology. When these LiDAR sensors move continuously using multiple laser sensors, they create a 3D representation of the surroundings, ensuring the vehicle drives safely and without collisions. Almost all Level 3 autonomous vehicles use LiDAR scanners to increase the vehicle’s visibility to about 300 meters during the day.

In addition, advances in AI such as object detection algorithms along with LiDAR help vehicles detect pedestrians, road signs, and other vehicles on the road. Other deep learning algorithms help improve the user experience through improved voice recognition, gesture recognition, and sentiment analysis to help in effective interaction with the vehicle. Last but not least, Big Data analytics techniques are being used by self-driving car manufacturers to improve vehicle autonomy by analyzing data collected through radars, scanners, and cameras.

Our methodology

To compile a list of the 10 best self-driving stocks to buy, we looked at the self-driving holdings of the Global X Autonomous & Electric Vehicles ETF. We selected the top 20 holdings from the ETF and ranked the stocks that were most widely held by institutional investors in Q1 2024. The list is sorted by ascending number of hedge fund holders of each stock.

Why do we care about what hedge funds are doing? The reason is simple: Our research has shown that we can outperform the market by mimicking the best stock picks of the best hedge funds. Our quarterly newsletter strategy selects 14 small- and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (more details here).

QUALCOMM Incorporated (NASDAQ:QCOM)

Number of hedge fund owners: 78

QUALCOMM Incorporated (NASDAQ:QCOM) is a leading technology company that develops backend technologies for various wireless technology industries. The company operates through three primary segments, including Qualcomm CDMA Technologies (QCT), Qualcomm Technology Licensing (QTL) and Qualcomm Strategic Initiatives (QSI). The QSI segment invests in early-stage technology companies, including 5G, artificial intelligence and automotive technologies.

QUALCOMM Incorporated (NASDAQ:QCOM) introduced the Snapdragon Ride platform, which provides advanced solutions for automated driving and advanced driver assistance systems (ADAS). Its connectivity and digital cockpit solutions connect cars with their surroundings and the cloud to create an exceptional user experience and enable automated driving.

The company reported a successful third quarter of 2024, with revenues increasing across the board. The company’s total revenues increased by 11% year-over-year, reaching $9.4 billion. Along with revenues, the company’s earnings also grew significantly. Pre-tax profit and earnings per share increased by 25% year-over-year, reaching $3 billion and $2.33 billion, respectively.

The most notable financial improvement for the company was the QCT segment, which grew 12% year over year to $8.1 billion. Growth in this segment was driven by strong performance in the IoT and automotive sectors.

QUALCOMM Incorporated’s (NASDAQ:QCOM) strong position in the autonomous vehicle segment can be gauged by the company’s fourth consecutive quarter of record QCT automotive revenue. Automotive revenue of $811 million increased 87% year over year, reflecting an increase in new vehicle launches and an increased supply of integrated automotive technology solutions.

QUALCOMM Incorporated (NASDAQ:QCOM) is one of the best autonomous vehicle stocks to buy, and we say that because it was held by 78 hedge funds in the first quarter of 2024, with a total stake value of $4.60 billion. Renaissance Technologies is the largest shareholder in the company, with a position worth $218.46 million. It is also cheap at current levels, as it is trading at 16 times its forward earnings, which is a 28% discount to the sector. Additionally, 39 analysts have a unanimous Buy rating on the stock, and their 12-month median price target is $212.50, which implies a 29% upside from current levels.

In its Q2 2024 investor letter, O’keefe Stevens Advisory stated the following regarding QUALCOMM Incorporated (NASDAQ:QCOM):

This quarter, interest in AI expanded beyond the obvious players like Nvidia, AMD, and hyperscalers. QUALCOMM enabled (NASDAQ:QCOM), a long-time investor, is gaining recognition for integrating AI into mobile phones. AI capabilities on Qualcomm’s devices enable real-time language translation, improved voice recognition and advanced imaging techniques as AI becomes an increasingly integral part of the mobile experience. Qualcomm benefits from being a market leader in delivering robust, efficient and versatile AI solutions. AI could be the first technological advance in several years to accelerate the smartphone replacement cycle as users crave these advanced capabilities.

Total QCOM takes 5th place on our list of the best self-driving car stocks. While we recognize QCOM’s potential as an investment, our conviction is based on the belief that AI stocks offer a better chance of achieving higher returns, and in a shorter time frame. If you’re looking for an AI stock that is more promising than QCOM but is trading at less than 5 times earnings, check out our report on cheapest AI action.

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Disclosure: None. This article was originally published on Insider Monkey.