Cathie Wood Is Buying Up Shares of This AI Dividend Stock. Should You?
Legendary fund manager Cathie Wood isn't typically associated with boring, dividend-paying companies. Known for picking up revolutionary firms such as Nvidia (NVDA), Tesla (TSLA) and Palantir (PLTR) on the cheap, Wood's investments - captured in her ARK Innovation ETF (ARKK) - are marked by a high-risk, high-reward philosophy.
So, when the manager of billions of dollars of funds is loading up on the shares of a boring tech company that pays a reasonably high dividend yield, it is worth noting.
About Qualcomm Stock
Founded in 1985, Qualcomm (QCOM) is a leading multinational semiconductor and telecommunications company, renowned for its innovations in wireless technology. It develops and commercializes foundational technologies and products used in mobile devices and other wireless products. It is currently valued at a market capitalization of $189.1 billion.
The stock has had a decent start to 2025, appreciating 13% in the year to date. Over the past 52 weeks, shares are up just over 22%.
Cathie Wood has made multiple purchases of QCOM stock to start the year, recently purchasing 7,068 shares through the Ark Next Generation Internet ETF (ARKW) for a total value of about $1.2 million. The consistent buying activity in Qualcomm stock by Wood reinforces the firm's bullish stance. What has her so keen on QCOM?
Solid Fundamentals
Qualcomm has been a steady performer, growing its revenue and earnings at 5-year compound annual growth rates (CAGRs) of 9.93% and 18.18%, respectively.
When the company reported its results for its fiscal fourth quarter in November, it beat estimates for revenue and earnings per share. Adjusted revenue increased by 18% from the previous year to $10.2 billion, and adjusted earnings went up by an even sharper 33% in the same period to $2.69 per share. Remarkably, this marked the 15th consecutive quarter of earnings beats from the company.
Cash flow from operations also remained robust at $12.2 billion for the 12 months ended Sept. 29, rising 8% from the prior year. Overall, Qualcomm closed the quarter with a cash balance of $7.8 billion which was much higher than its short-term debt levels of $1.4 billion.
On the dividend front, the company paid total dividends of $3.7 billion for the year ended Sept. 29, an increase from the previous year's figure of $3.5 billion. Its stock has a dividend yield of 2% and with a payout ratio of just 27.75%, leaving room for further growth.
Strategic Tailwinds
Qualcomm remains a dominant force in the wireless chipset industry and is actively expanding its AI capabilities across PCs, automotive applications, and smart home devices. As AI innovation accelerates, the demand for on-device AI solutions is expected to grow significantly, positioning Qualcomm to benefit from this trend. The company currently holds a 26.5% share of the 5G smartphone chipset market, securing the second-largest position overall while leading in the premium and high-end segment.
On the AI front, Qualcomm has partnered with Meta Platforms (META) to support Llama 3.2, an initiative designed to meet the growing demand for running generative AI directly on devices. Additionally, the company has collaborated with Amazon (AMZN) to develop a Cloud-to-Edge AI solution that integrates Amazon's SageMaker with Qualcomm's AI Hub. Qualcomm's Hexagon NPU, a specialized AI processor, is capable of performing up to 100 trillion operations per second in certain scenarios, enabling everyday devices like smartphones and home networking systems to handle increasingly complex.
In the automotive sector, Qualcomm's Snapdragon Cockpit Elite and Snapdragon Ride Elite platforms are poised to contribute to revenue growth in the coming years. The company's partnerships with major automakers such as Sony Honda Mobility, Mahindra, and others underscore its growing influence in advanced driver assistance systems. The company is on track to generate more than $4 billion in annual automotive revenues by fiscal 2026.
The company is also seeing signs of a turnaround in its Internet of Things (IoT) business. New product launches are driving demand across consumer, industrial, and networking applications. Management anticipates that IoT revenue will grow by more than 20% year-over-year in the first quarter of its fiscal Q1, supported by inventory normalization and increased adoption of AI-ready solutions.
Thus, Qualcomm's diversified expansion into AI, automotive, and IoT markets positions it for sustained long-term growth.
Analyst Opinions on QCOM
Overall, analysts remain cautiously optimistic about Qualcomm, giving it a rating of 'Moderate Buy' with a mean target price of $203.35. This denotes upside potential of about 19.4% from current levels. Out of 32 analysts covering the stock, 16 have a 'Strong Buy' rating, one has a 'Moderate Buy' rating, 14 have a 'Hold' rating and one has a 'Strong Sell' rating.
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