There’s a battle of the technology titans brewing after Apple (NASDAQ:AAPL), a few days ago, sent a not-so-hidden message to semiconductor giant Qualcomm (NASDAQ:QCOM). With AAPL and Qualcomm stock still well below last year’s highs, their ongoing feud should be quite dramatic.
In a well-received public announcement, Apple disclosed plans to bring 1,200 employees to San Diego, where QCOM is based. For us San Diegans, this is welcome news. I’d like to think we’re a bit smarter than some of the people in New York City: while nothing in life is perfect, we know a good thing when we see it.
But the owners of Qualcomm stock reasonably suspect that AAPL has ulterior motives. For the past few years, QCOM and Apple have been locked in an increasingly-antagonistic conflict. It’s a long story that is well beyond the scope of this article. But to briefly summarize, QCOM alleges that Apple infringed its intellectual property. Conversely, Apple counters that QCOM has charged the iPhone maker excessive royalties.
So who’s right, and who’s wrong? The better question is, who’s more in the right than in the wrong? As the EE Times’ Junko Yoshida asserts, the conflict originated more than a decade ago when Apple launched its first iPhone. Back then, Apple threatened to use a competing wireless technology unless QCOM offered generous marketing payments.
But whatever the original catalyst, the battle has proven to be overwhelming. Like squabbling siblings going after the last piece of pie, neither side appears willing to concede.
But just how much will this raging inferno impact Qualcomm stock going forward? Probably not as much as you might think.
Qualcomm Stock Will Benefit From 5G
Don’t get me wrong: I’m not suggesting that QCOM stock will escape unscathed from the ongoing, bitter legal disputes. Admittedly, in the nearer-term, Qualcomm stock appears poised to experience some choppiness.
Most notably, Apple stopped buying smartphone modem providers from Qualcomm, turning to QCOM’s rival, Intel (NASDAQ:INTC), instead. Adding insult to injury, AAPL later began exploring the possibility of building modems in-house. On the surface, it appears that, no matter what AAPL does, Qualcomm stock will be in trouble.
And while QCOM has positive momentum in domestic and international courts, the chipmaker is no angel. Qualcomm’s practice of leveraging its exclusive partnership with Apple to cripple its competition attracted federal oversight and investigations.
Apple CEO Tim Cook comically quipped that doing business with Qualcomm is like “buying a sofa” and paying “a different price depending upon the house that it goes into.”
But despite all the sneers and outright hostilities, one factor stands above the rest: Qualcomm’s chips are currently the only legitimate pathway to the next-generation 5G network. As a result, you shouldn’t overlook Qualcomm stock.
Intel’s modems couldn’t come anywhere close to Qualcomm’s performance metrics. And when it comes to 5G, QCOM enjoys first-to-market advantage with its Snapdragon X50.
Let’s also not forget that Apple is miles away from integrating its in-house modems into its first 5G-enabled iPhone, slated for release next year. If Apple’s own modems aren’t ready, Intel is on standby. However, Cupertino has expressed displeasure with Intel’s performance, or lack thereof.
Thus, all roads to 5G currently require paying the Qualcomm toll, which will naturally benefit QCOM stock.
Qualcomm Stock Has Other Tailwinds, Too!
One of the main catalysts for 5G is that this tech enables multiple functions. Key among them is autonomous driving, and guess who’s in the driver’s seat?
In November of last year, I stated that Qualcomm stock is a direct play on automated transportation. At the time, I wrote:
According to MIT Technology Review, Qualcomm, along with Ericsson (NASDAQ:ERIC), Huawei and Nokia (NYSE:NOK), began C-V2X development in 2016. C-V2X is an acronym for “cellular-vehicle-to-everything,” and represents unprecedented wireless-tech integration with vehicles.
Prior telecom technologies simply didn’t have the bandwidth to accommodate true autonomous transportation. But with engineers pushing the boundaries towards science-fiction levels, automated technologies could very well become reality. That logically boosts the profile of QCOM stock, as the underlying company can explore multiple, revenue-generating options.
Given this context, Qualcomm’s lackluster trading off its recent highs is a big opportunity for speculators. Not only that, but its present 4.6% dividend yield may entice those who aren’t the biggest risk-takers.
As of this writing, Josh Enomoto did not hold a position in any of the aforementioned securities.