Bank of America has highlighted top stocks in the consumer semiconductor space as the sector faces ongoing pressure from sluggish smartphone demand, which could persist until 2027 if memory prices don't stabilize.
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The consumer chip sector is still under pressure due to weak smartphone sales, creating challenges for semiconductor manufacturers heavily reliant on the mobile segment. Bank of America analyzes companies that can navigate these tough market conditions through diversification strategies and opportunities opened by new technologies.
Qualcomm (NASDAQ:QCOM)
Bank of America sets a target price for Qualcomm at $145, based on a 13x forecasted adjusted earnings per share (non-GAAP) for 2027 of $11.55, excluding stock-based compensation. The company applies a discount relative to diversified and analog peers due to Qualcomm's more tempered growth outlook and limited presence in data center infrastructure.
The downside risks include: the halting of modem supplies to the largest client worth $7–8 billion by fall 2027, potential loss of share from a key Android client, clients shifting to in-house developments, the risk of not renewing licensing agreements in the first half of 2027, dependency on China, and competition in the saturated AI solutions market for data centers. Growth potential is linked to diversification into auto and IoT segments with a target of $22 billion by the 2029 fiscal year, the development of AI inference accelerators, Nuvia ARM processors, a shift towards the premium segment, and growth in AI content on devices.
Recently, Qualcomm received rating upgrades from analysts at Bernstein and Tigress Financial Partners: both firms cited growth opportunities in AI-supported smartphone, automotive, and IoT markets. Tigress Financial also highlighted the company's new $20 billion stock buyback program.
Skyworks Solutions (NASDAQ:SWKS)
Bank of America sets a target price for Skyworks Solutions at $60, based on an 11x forecasted price-to-earnings ratio for 2027, excluding stock-based compensation. The valuation falls within the historical range of 8–22x and reflects a balance between sector overvaluation and tailwinds from AI smartphones on one side, and headwinds from the merger and content loss in the iPhone 17 on the other.
Growth risks include: increasing market share, sustained momentum from 5G rollout, consolidation in the semiconductor industry, unique opportunities for mergers and acquisitions facilitating higher growth, and successful completion of the planned merger with Qorvo. Downside risks relate to losing market share with Apple, which accounts for 70% of revenue, a more significant-than-expected year-over-year decline in smartphone shipments, and a faster drop in average selling prices amid limited pricing power.
In recent news: Skyworks Solutions reported Q2 2026 financial results that exceeded analyst expectations: revenue was $944 million, with earnings per share at $1.15. The company also submitted updated financial statements to the U.S. Securities and Exchange Commission (SEC) regarding the planned acquisition of Qorvo.