It seems like Qualcomm (NASDAQ:QCOM) stock has been featured in the news every day — and not always in a positive light.Bad news follows upon good news, leaving investors with a seasick feeling and shaking some shareholders out of their position.
I don’t think it’s necessary to panic-sell Qualcomm stock now; if anything, it could be a time to buy on the dips and hold until the news-induced catalysts blow over.
Personally, I enjoy this type of volatility – especially when the company has a solid product offering, which I believe is the case with Qualcomm.
Too Big for Its Own Good?
Usually safety-minded investors prefer to invest in large companies that dominate their respective industries, but occasionally you’ll see a company that gets so big that antitrust concerns rear their ugly head. That seems to be the case with Qualcomm, as government intervention has pushed the QCOM stock price up and down with each new development.
As the No. 1 chip maker in the world, perhaps we ought to have expected some pushback from regulators at some point. In early 2018, the European Commission fined Qualcomm 997 million euros for apparently abusing its market dominance in LTE baseband chipsets. Evidently, Qualcomm had prevented its rivals from competing in the market by making significant payments to a key customer on the condition it would not buy from rivals (this is illegal under strict EU antitrust rules).
In the words of Commissioner Margrethe Vestager, Qualcomm “illegally shut out rivals from the market for LTE baseband chipsets for over five years, thereby cementing its market dominance.”
I can only imagine the venom with which Ms. Vestager issued that indictment, but (and this might be my free-market Americanism revealing itself) I look at the words “shut out rivals” and “cementing its market dominance” as positives, not negatives (as an investor, at least).
More Money, More Problems
Word on the street is that Qualcomm may face a second EU antitrust fine for allegedly blocking rivals from competing in the market. It appears the European Commission is seeking to make an example of Qualcomm; as I see it, the EU’s fines can’t keep a good company down for long.
Back in the U.S., Qualcomm lost an antitrust lawsuit brought by the Federal Trade Commission in May of this year; federal Judge Lucy Koh alleged that Qualcomm has engaged in a “no license, no chips” policy wherein the company would not sell chips to customers unless they also inked a licensing agreement. In reference to this, Koh asserted that Qualcomm “refused to license its rivals and restricted rivals’ customer base with the intent to prevent rivals from investing in research and development, and to weaken them in the market.”
In the most recent turn of events, however, the U.S. Department of Justice is now asking courts to delay the enforcement of Koh’s decision. Noting that Qualcomm’s 5G capabilities are “foundational for new military capabilities,” the DoJ has invoked nothing less than the security of the nation in its defense of Qualcomm:
The district court’s ruling threatens competition, innovation, and national security. Its liability determination misapplied Supreme Court precedent, and its remedy is unprecedented. Immediate implementation of the remedy could put our nation’s security at risk, potentially undermining U.S. leadership in 5G technology and standard-setting, which is vital to military readiness and other critical national interests.
I had never thought of a QCOM stock position as an investment in our national security — but hey, as long as I’m profiting, I’ll take any excuse I can get.
The Bottom Line on QCOM Stock
Relax — you don’t need an excuse as profound as national security to own Qualcomm stock now. As far as I’m concerned, antitrust fines are a temporary problem and a sign of a truly redoubtable company; in truth, the only ones who should fear Qualcomm are the competition.
As of this writing, David Moadel did not hold a position in any of the aforementioned securities.