MediaTek’s AI Ambitions
MediaTek is taking a cue from Qualcomm’s playbook by venturing into the field of artificial intelligence (AI). In a recent report, it was revealed that MediaTek is developing a new chip that enables on-device AI services for smartphones. This means that smartphones equipped with this chip will be able to provide AI responses without relying on cloud-based answers from data centers. This is particularly advantageous when devices face connectivity issues and cannot access the cloud.
Qualcomm, on the other hand, has launched its Gen3 Snapdragon 8 chips for high-end smartphones and Gen3 Snapdragon 7 chips for lower-end phones, aiming to empower both tiers of devices with AI capabilities. In response, MediaTek has introduced the Dimensity 8300 chip, complementing its existing Dimensity 9300 chip, targeting the same markets and purposes.
MediaTek’s foray into AI chips presents potential competition to Qualcomm, as it might take a bite out of Qualcomm’s market share in this segment.
In an unrelated yet noteworthy development, industry sources have reported that Meta Platforms, formerly Facebook, has chosen MediaTek over Qualcomm to provide chips for its first-generation augmented reality (AR) glasses. This decision implies that Qualcomm will miss out on potential revenue growth by losing the contract to MediaTek.
An Impact on Qualcomm’s Outlook
These recent developments may cause some investors to reconsider their enthusiasm for Qualcomm. While the news doesn’t immediately impact Qualcomm’s standing, it highlights the emerging competition and potential revenue loss that Qualcomm could face in the future. Qualcomm’s stock, which has experienced a 20% surge in the last month and currently trades at 20 times trailing earnings, no longer appears as attractively priced.
As MediaTek positions itself as a formidable rival, the dynamics of the semiconductor market are shifting, and Qualcomm must navigate these challenges to maintain its market leadership.