As you likely know, AI stocks have been pulling back in recent weeks. Qualcomm (NASDAQ:QCOM) is no exception. During this time frame, Qualcomm stock has fallen by around 20%, from around $200 to around $160 per share.

With broad sentiment for the AI growth trend shifting to bearish, not even the release of solid quarterly results has been enough to fight the trend.

Worse yet, with this reversal, Qualcomm skeptics are coming out of the woodwork. Once again, they are laying out the bear case for this mobile-focused chip company that’s trying to become an “AI contender.”

So, does that mean it’s time to pack it in with QCOM? Not quite. The pessimists do make a few valid points about certain risks with Qualcomm.

However, in my view, the AI-driven bull case remains intact. As such, a “buy the dip” opportunity may be emerging. All it requires to seize it is a strong stomach and a little patience.

Qualcomm Stock: The Bear Case Re-Emerges

On July 31, Qualcomm released its results for the quarter ending June 23, 2024. For the quarter, the company reported year-over-year revenue growth 11%, and earnings growth of 18%.

Yet while both figures came in slightly above forecasts, again this wasn’t enough to make investors excited again.

Rather, the market used a lack of a strong earnings beat as an excuse to bail on Qualcomm stock on the first full trading day after earnings.

It also didn’t help that the tech stock sell-off intensified that same day. Also, several analysts have voiced their concerns about the degree in which AI-related smartphone chip growth boosts results in the coming quarters.

With this, the bear case has come back into vogue. In a nutshell, the bears believe that underwhelming mobile chip sales growth will outweigh other positives.

Namely, potential growth from Qualcomm’s rollout of its Snapdragon X system-on-a-chip platform for AI-PCs.

Admittedly, this makes sense. Despite management’s touting of this product line, Qualcomm has yet to come out with any initial sales numbers.

Nevertheless, there may be a silver lining to the current downbeat stance held by analysts and investors. It all has to do with QCOM’s current valuation.

A Low Valuation Means Big Payoff Potential

Even during the height of “AI mania,” investors priced Qualcomm stock at a discount to other high-profile AI chip plays.

After the latest sell-off, a high valuation gap between QCOM and names like Advanced Micro Devices (NASDAQ:AMD) and Nvidia (NASDAQ:NVDA) remains.

QCOM trades at a forward price-to-earnings multiple in the midteens, whereas AMD and NVDA both trade for around 39 times forward earnings.

However, while the market believes this massive valuation discount is warranted today, that may not be the case a few quarters from now.

As BofA’s Tal Liani, an analyst far more upbeat on Qualcomm, argued after earnings, there may be a path for subsequent results to exceed expectations.

To back up this argument, Liani cited several factors. They include a rebound in premium smartphone sales, better-than-expected success with AI-PC chips, and the potential for the company to ink favorable licensing deals.

Even if all of this results in Qualcomm simply meeting expectations for the coming fiscal year ending September 2025, this could mean a big surge for shares. How? Through a combination of shares rising on improved results, plus a rerating to the upside.

$225 by 2025? It’s Possible, So Buy the QCOM Dip

Based on current sell-side consensus, Qualcomm earnings could hit $11.21 per share next fiscal year. Meeting these expectations, plus finally putting to bed notions that Qualcomm is an “AI dud,” could lead to multiple expansion for shares.

For instance, if investors rerate QCOM to a forward multiple of 20, this would represent a surge to $225 per share. That’s over 41% above current price levels.

A move to between 25 and 30 times forward earnings, while perhaps more of a tall order, could send Qualcomm up to prices more than double that of current levels.

Weighing this against the chances that this already-discounted chip stock experiences further multiple compression, it’s clear that risk/reward is well within your favor, no matter what the naysayers say.

Once again, keep in mind that weakness may continue in the months ahead, but if you’re willing to wait, and can stomach the volatility, you may want to consider buying the dip with Qualcomm stock.

On the date of publication, Thomas Niel did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

On the date of publication, the responsible editor did not have (either directly or indirectly) and positions in the securities mentioned in this article.