The shortage of memory chips hit Qualcomm and Arm. Their shares plummeted

The global shortage of memory chips has had a negative impact on the production chains on which the revenues of mobile processor developers Qualcomm and Arm Holdings directly depend. Disappointing forecasts of both companies led to the collapse of their quotations.

Qualcomm shares fell more than 10% in the New York postmarket after the forecasts were announced. Arm securities fell by almost 8%.

Qualcomm, one of the largest developers of mobile processors, has faced a weak volume of orders: smartphone manufacturers cannot buy enough memory chips from suppliers and are forced to reduce orders for other components, including Qualcomm products. As a result, the company's revenue forecast for the current quarter, announced on February 4, was below market expectations, Reuters writes.

"Industry-wide [chip] memory shortages and price increases are likely to drive the overall size of the cell phone industry throughout the fiscal year," the agency quoted Qualcomm CEO Cristiano Amon as saying at a confab on the day of the quarterly earnings disclosure. - I believe memory is unfortunately impacting the entire sector." Qualcomm's fiscal year ends in September.

Arm Holdings develops the architecture underlying most smartphone processors - including those made by Qualcomm. Stagnant mobile processor sales pose a risk of a decline in Arm's license revenues (royalties). Because of the impact of memory chip shortages on cell phone shipments, royalties could fall by as much as 2% in the next fiscal year, which starts in April, Arm CFO Jason Child warned on a same-day teleconference with Qualcomm.

Wall Street consensus ratings for both chipmakers are "above market" (Overweight, corresponding to a Buy recommendation). Qualcomm has almost equal numbers of optimistic and neutral assessments: 18 recommendations to buy (Buy and Overweight) versus 19 recommendations to hold (Hold). The market believes in Arm more readily: there are twice as many "bulls" as cautious experts (27 positive ratings vs. 13 neutral ones), according to FactSet data. Average target prices of Qualcomm and Arm securities calculated by the service assume growth of quotations in the nearest year by 24% and 53% respectively.

Morningstar and JPMorgan Chase expect memory chip shortages to persist up to and including 2027. Due in part to rising memory prices, shipments of advanced mobile chips will decline by 7% in 2026, Counterpoint Research predicts.

Against this background, both Qualcomm and Arm are working to reduce their dependence on the smartphone market, refocusing on the fast-growing and high-margin market of chips for data centers. Qualcomm expects to start producing them in the second half of this year, with meaningful revenue expected in fiscal 2027, Reuters reports.

This article was AI-translated and verified by a human editor