QCOM is undervalued at a 14x forward P/E with potential for >40% upside to a fair value of $253+ within 12-18 months due to data center expansion opportunities.

Qualcomm is one of the stocks I recently bought for my portfolio, and I wanted to make a video to discuss why I made this investment. Of course, this is a stock I rated as a buying opportunity all year, and I was very optimistic about it.

At one point, it was on my list of best stocks to buy, but the stock price rose so much and so quickly that I said it was a good time to take profits, although I still see it as a buying opportunity , but perhaps not to the extent that it would put it on the list of best.

So, you can observe this volatile price movement of Qualcomm stock. The year started poorly. The price dropped to $125 per share. This was roughly the time when I put it on my list of top buy opportunities, and the stock subsequently rose to $250.

The price almost doubled in that short period, and that's when I removed it from my list of best stocks to buy. Since then, the stock price has fallen to $150. It has undoubtedly been a volatile year.

To be more precise , you can see my calculations where Qualcomm's stock rose by 97% during the period in which I ranked it as one of the best stocks to buy in 2026.

Qualcomm's business has flourished during the pandemic. The smartphone industry is its primary category for sales and profits. Developments in the smartphone industry have been positive for Qualcomm.

People are increasingly inclined to buy more expensive smartphones, which of course contain more components, and that's good news for Qualcomm. This trend has continued.

However, there have been recent developments that represent bad news for the smartphone industry. Memory prices are rising , and storage unit prices are rising . There has been a very high demand for memory and storage in data centers.

Prices jumped by triple percentage points. Consequently, smartphone manufacturers were also forced to raise the prices of those units. This has led to challenges in smartphone sales. This is a short-term matter.

In the long run, people tend to buy more powerful smartphones. Smartphones with more integrated technologies, and phones with higher capabilities. People have shown a willingness to pay for those premium smartphones.

In the long run, this is good news for Qualcomm.

Qualcomm has also expanded beyond its core business to include the automotive and personal computer sectors. They have done so with relative success, gaining market share very quickly since entering those categories.

The automotive sector, in my view , could be the next catalyst. Self-driving car technology requires far more components in vehicles. Again, this is a positive thing for Qualcomm, because it means greater demand for components.

Qualcomm receives licensing fees and royalties for those components that go into those automotive sectors.

Self- driving cars require far more components than the cars on the roads today. That will be an important driver. I don't know if that will happen in two years, four years , or six years from now .

But this sector is definitely expanding. We are beginning to see hundreds and thousands of self- driving vehicles on the roads today in the United States . But even more so in China and Southeast Asia, where governments in those regions are less bureaucratic and allow this technology to move forward more quickly .

I think it will take a little longer in the United States, but I believe self- driving car technology will become widespread. Even if they are not fully autonomous vehicles, but rather vehicles that provide increased support for drivers such as lane keeping assist, advanced cruise control, emergency braking, and parking assistance, all of which require more technology. Qualcomm will benefit from this.

But what excites me most is Qualcomm's relationships and new customer agreements in the field of data centers. They signed an agreement with Meta Platforms. Amazon is also considering the matter and looking to sign an agreement.

Given Qualcomm’s success in the categories it has already expanded into, I am relatively optimistic that Qualcomm can gain a substantial market share in this sector, because any share in this area would be of great importance to Qualcomm.

The data center industry is so huge that it could have a massive impact on Qualcomm, which generated $44 billion in revenue over the past twelve months. To put that figure in context, the five largest cloud computing companies in the data center industry alone will spend more than $850 billion this year.

Next year, my estimates indicate that spending could exceed one trillion dollars. Therefore, if Qualcomm were able to capture just 1% of the market share in that sector, it could add $10 billion to Qualcomm's annual revenue.

So, this is a big deal, and I expect it to be, and given Qualcomm’s success in previous expansions into new industries, that’s why I’m confident it will achieve relative success in this area.

Profit margins have been volatile, but generally good. Approximately 23.5 percent operating margin over the past twelve months. It has reached 34 %, and if they have indeed witnessed that surge from the AI data center market , I wouldn't be surprised to see their operating margins exceed 30%.

Remember that they operate on an asset-light business model, which means they outsource manufacturing. This would allow for profitable unit economics for Qualcomm if it does indeed enter into multibillion dollar agreements.

These agreements are likely to come with good profit margins.

Because of these obstacles in the smartphone industry, Qualcomm's stock is trading near its lowest levels in several years. The stock is trading at a forward price-to-earnings ratio of only 14.

It is one of the cheapest semiconductor companies operating on an asset-light business model.

Therefore, it deserves a relatively excellent rating compared to one of the cheaper semiconductor companies. If you compare Qualcomm to companies like Marvell or Broadcom, you will find that it trades at much lower valuations compared to those other companies.

The stock looks cheap when measured on a forward price-to-earnings basis, and to me, it also looks cheap using my discounted cash flow model. I calculated a fair value of over $253, which leaves up more than 40% over the next 12 to 18 months at the current market price of $181.

I think the upside is even greater when looking at the longer term, such as 24 to 48 months, because I do n't expect them to start generating any meaningful revenue from those AI deals.

Not before they probably start to increase in the second half of 2027 and continue to do so in the middle of 2028, but not before the second half of 2028; And then, starting in 2029, I expect Qualcomm to really start generating tangible revenue from the AI category .

Therefore, I see significant upside potential here in the near and medium term for Qualcomm.

These are the reasons that led me to buy Qualcomm shares for my portfolio, and if prices remain around their current levels for the next 6 to 12 months , I am likely to add to my financial position in anticipation of gaining future market share in the field of artificial intelligence.