Qualcomm (QCOM): Phill Gross’s Hidden Gem in a Volatile Market

Institutional investor Phill Gross, co-founder of Adage Capital Management—one of the world’s most influential hedge funds—has quietly built a $159.57 million stake in Qualcomm (QCOM) as of late 2024. This position, up 18.2% from the prior quarter, underscores Gross’s confidence in Qualcomm’s ability to navigate a shifting tech landscape and deliver a 38.22% upside by 2025. But why is this chip giant, a stalwart of mobile communications, suddenly a top pick in a market obsessed with AI? Let’s break it down.

Adage’s Bet: More Than Just a “Legacy” Tech Play

Adage’s stake in Qualcomm isn’t merely a hold—it’s a strategic play on two core themes: 5G dominance and AI adjacency. Qualcomm’s $10.84 billion in Q2 2024/2025 revenue, driven by a 12% YoY jump in handset chip sales, reflects its entrenched position in the smartphone market. But Gross’s focus extends beyond that.

1. 5G Leadership: The Foundation of Growth

Qualcomm’s role as a pioneer in wireless standards (5G, 4G) remains unmatched. Its Snapdragon chips power flagship devices from Samsung, Apple, and others, while its patent portfolio generates steady licensing revenue. With 5G adoption accelerating in markets like China and Southeast Asia, Qualcomm’s $6.38 billion in cash equivalents gives it flexibility to invest in R&D and partnerships.

2. AI’s Quiet Revolution: Serdes Tech and Serendipity

While AI stocks like NVIDIA (NVDA) grab headlines, Qualcomm is quietly positioning itself to capitalize on high-speed data processing demands. The firm’s exploration of acquiring Alphawave, a UK-based serdes technology firm, hints at its ambition to dominate the infrastructure behind AI chips. Serdes tech enables ultra-fast data transmission—critical for AI’s compute-heavy workloads.

3. China: A Key Growth Catalyst

Qualcomm’s ties to China—a major market for its chips and licensing—are gaining momentum. A planned meeting between Qualcomm’s CEO and Chinese President Xi Jinping (announced late 2024) signals potential regulatory and trade breakthroughs. This is especially crucial amid U.S.-China tensions over semiconductors.

The Risks: Volatility and the AI Squeeze

Qualcomm isn’t without challenges. Its beta of 1.08 means its stock swings more sharply with the market, and it underperformed over 90 days ending mid-2024. Meanwhile, AI stocks like NVIDIA have surged, siphoning investor attention—and Qualcomm’s 38% upside may pale against shorter-term AI gains.

The Case for Long-Term Value

Despite these headwinds, Qualcomm’s fundamentals are robust:
- Valuation: A P/E ratio of 10.97 and P/S ratio of 4.92 suggest it’s undervalued relative to peers.
- Balance Sheet: Minimal debt (0.90% debt-to-equity) and a $2.7 billion shareholder return program in Q4 2024 (via buybacks and dividends) signal financial health.
- Diversification: Its automotive and IoT businesses—now 18% of revenue—are growing steadily, reducing reliance on smartphones alone.

Conclusion: Qualcomm’s Multiyear Play

Phill Gross’s Qualcomm stake isn’t a gamble—it’s a calculated bet on sustained tech infrastructure demand. While AI stocks may offer flashier returns, Qualcomm’s 5G leadership, cash reserves, and strategic moves into serdes tech and China partnerships position it for multiyear growth.

The numbers back this:
- 38.22% upside projected by Adage’s analysis, based on $10.3 billion in Q3 2025 revenue guidance and a 12% YoY growth trajectory in core businesses.
- 79 hedge funds holding $3.28 billion in Qualcomm shares as of late 2024—a 6% increase in institutional ownership over six months.

Investors seeking stability in a volatile tech sector would do well to look past Qualcomm’s “old economy” reputation. Gross’s contrarian pick could be a winner as 5G and AI-driven infrastructure spending hits its stride.

In short, Qualcomm isn’t just a legacy player—it’s a bridge to the next tech era, and Gross’s bet suggests it’s nowhere near obsolete.