Why QUALCOMM, Inc. (QCOM) Still Rules

Currently, NVIDIA Corporation (NASDAQ:NVDA) looks weak as Tegra 3 is still being supplied to clients, whereas competitors have much better products to provide. The Tegra 4i processors are also more like Tegra 3, and are looking attractive mainly because they 4G compatible. The delay in the launch of Tegra 4 and 4i will shorten the time span for deriving benefit for the company.

NVIDIA’s primary product is its graphic chip, which helped it sail through in the last quarter despite falling PC sales. Though the company’s Tegra line of SOC segment revenue have declined from the year-ago period, but its GPU segment revenue improved 8% as demand for higher-end systems remained strong.

However, Intel and AMD are trying to make Intel’s processors into SOCs by adding on-chip GPUs to them. The built-in GPUs previously powered mobile-PC applications mainly, but off-late they are making their way into desktops, too. The success of built-in GPUs might possibly reduce discrete GPUs market, thus causing NVIDIA sales to dwindle in the future.

Currently, I believe NVIDIA is caught up in the middle. Its GPU segment revenue can decline over time and the company’s Tegra line of SOCs are also not being able to deliver. At the moment I do not recommend buying NVIDIA.

Final words

QUALCOMM, Inc. (NASDAQ:QCOM) is going strong as it continues to dominate the mobile industry. Its shareholders have benefited with a 40% hike in quarterly dividends. More cash in the form of a new $5 billion share buyback program is also being returned to shareholders. In this year, Qualcomm’s shares have held up against many of its competitors. At a forward Price-to-Earnings (P/E) ratio of 13 times I believe the stock can grow further, especially given its attractive dividend policies and strong expectation of growth in the bottom line. I  believe if stock prices fall further it would be a good time to shop this stock.

tarun bachhawat has no position in any stocks mentioned. The Motley Fool recommends Intel and NVIDIA. The Motley Fool owns shares of Intel and Qualcomm. tarun is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

The article Why This Semiconductor Company Still Rules originally appeared on Fool.com and is written by tarun bachhawat.

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.