Chipset and connectivity contender Qualcomm (NASDAQ:QCOM) proved itself as an early influencer in the now-prevalent 5G-network domain. This helped to propel Qualcomm stock from the $50s to the $80s last year, but there should be more gains coming in 2020.
An exclusive contract with Samsung is a major coup for both companies as Samsung will manufacture cutting-edge 5G chips for Qualcomm. This, along with the recent unveiling of the company’s third-generation 5G modem known as the Snapdragon X60, positions Qualcomm as a major player in the 5G sphere.
5G Deal Takes the Market by Storm
Although the year is still young, the contract between Samsung and Qualcomm could actually be 2020’s most impactful 5G deal. Qualcomm has estimated that between 175 and 225 million 5G-enhanced smartphones will be sold this year, and Samsung’s robust 5-nanometer manufacturing technology will empower Qualcomm to meet the demand for 5G-enabled smartphone connectivity.
The announcement of the contract was immediately emblazoned across both the tech and the financial headlines, and for good reason. Last year, Samsung revealed its plan to invest a whopping $116 billion into non-memory chips over the next decade. Samsung’s contract with Qualcomm means that the latter company can now supply leading-edge 5G-connected chips quickly and efficiently as the world transitions out of the 4G era.
Most of the commentary I’ve seen has focused on how this contract will benefit the supplier more than the client. However, I believe it would be an error to discount the impact that the contract with Samsung will have on Qualcomm stock as fastest-to-market status will determine who wins the 5G rollout race in the coming months.
Raising the 5G Bar
Qualcomm claims to be the company that “introduced the world to 5G,” and while I’m not prepared to confirm that Qualcomm single-handedly brought 5G connectivity to the world, I will concede that the company has earned its share of the market. This is confirmed by the rollout of Qualcomm’s Snapdragon X60 5G Modem-RF System, which the company touts as a game changer in the connectivity domain:
“The Snapdragon X60 Modem-RF solution allows more operators to offer fiber-like internet speeds and low latency using 5G, unlocking the next generation of connected experiences for more people. Consumers will be able to enjoy applications like highly responsive multiplayer gaming, immersive 360-degree video, and always-connected cloud computing — all with superior power efficiency for all-day battery life.”
Beyond having a cool name, the Snapdragon X60 is expected to enhance 5G speeds through carrier aggregation as well as efficiency via its 5-nanometer manufacturing process. Moreover, a technology known as mmWave-sub6 aggregation has the potential to enhance peak throughput, which is a fancy way of saying even faster speeds.
Qualcomm is billing the Snapdragon X60 as a “comprehensive 5G modem-to-antenna solution” and as the global migration from 4G to 5G presents incredible investing opportunities, it’s encouraging to see Qualcomm aggressively pursuing innovative technologies and solutions. The company’s competitors will inevitably roll out their responses to the Snapdragon X60, but I fully expect Qualcomm to already have its next 5G-tech solutions in development by the time the competition catches up.
The Final Word on Qualcomm Stock
While it certainly felt like the majority of financial and tech commentators touted the contract with Qualcomm as a win for Samsung, I view it as a win-win for both companies as well as for consumers as the 5G migration moves forward throughout the world. The mutually beneficial deal with Samsung, coupled with the rollout of the fast and powerful Snapdragon X60, make Qualcomm stock an undisputed “B”-rated champion amid the ongoing 5G revolution.
Louis Navellier may hold some of the aforementioned securities in one or more of his newsletters.
