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IBM vs. Qualcomm: Which AI Tech Stock is the Better Buy Now?
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Key Takeaways
IBM is seen as the better AI tech pick now, despite lagging Qualcomm's past-year gains.
IBM added Mixtral-8x7B to watsonx, citing 50% higher throughput and potential 35%-75% latency cuts.
QCOM is pushing on-device gen AI and auto/edge chips, but faces Intel rivalry and inventory drag.
International Business Machines Corporation (IBM - Free Report) and Qualcomm Incorporated (QCOM - Free Report) are legacy tech behemoths aggressively expanding into AI infrastructure and enterprise AI solutions, with growing exposure to edge computing and next-generation AI workloads. IBM offers cloud and data solutions that aid enterprises in digital transformation. In addition to hybrid cloud services, the company provides advanced information technology solutions, computer systems, quantum computing and supercomputing solutions, enterprise software, storage systems and microelectronics.
Qualcomm offers high-performance, low-power chip designs for mobile devices, PCs, XR (Extended Reality), automotive, wearable, robotics, connectivity and AI use cases. The company boasts a comprehensive intellectual property portfolio comprising 4G, 5G and other technologies. Qualcomm’s brands include Snapdragon systems-on-chip, FastConnect Wi-Fi and Bluetooth systems, and Qualcomm-branded 4G, 5G and IOT equipment. The company is currently integrating on-device generative AI into all of its product lines.
Let us delve a little deeper into the companies’ competitive dynamics to understand which of the two is relatively better placed in the industry to warrant a place in your investment portfolio.
The Case for IBM
IBM is poised to benefit from healthy demand trends for hybrid cloud and AI, which drive the Software and Consulting segments. The company’s growth is expected to be aided by analytics, cloud computing and security in the long term. With a surge in traditional cloud-native workloads and associated applications, along with a rise in generative AI deployment, there is a radical expansion in the number of cloud workloads that enterprises are currently managing. This has resulted in heterogeneous, dynamic and complex infrastructure strategies, which have led firms to undertake a cloud-agnostic and interoperable approach to highly secure multi-cloud management, translating into a healthy demand for IBM hybrid cloud solutions.
IBM has integrated the open-source Mixtral-8x7B large language model into its watsonx AI and data platform. Mixtral-8x7B's incorporation underscores IBM's dedication to cutting-edge AI research and development. Built on innovative Sparse modeling and the Mixture-of-Experts technique, this model excels in rapid data processing and contextual analysis. Its ability to efficiently handle vast datasets makes it a valuable asset for businesses seeking actionable insights. The optimized version of Mixtral-8x7B, developed by Mistral AI, showcases impressive performance gains. Internal tests reveal a remarkable 50% increase in throughput compared to the standard model. By leveraging quantization techniques to reduce the model size and memory requirements, IBM anticipates significant reductions in latency, potentially ranging from 35% to 75%, depending on batch size.
Despite solid hybrid cloud and AI traction, IBM is facing stiff competition from Amazon.com, Inc.’s (AMZN - Free Report) AWS and Microsoft Corporation’s (MSFT - Free Report) Azure. Increasing pricing pressure is eroding margins, and profitability has trended down over the years, barring occasional spikes. The company faces a potent threat from AI firm Anthropic as the latter’s Claude Code tool can modernize legacy COBOL systems — a foundational programming language deeply embedded in IBM’s mainframe ecosystem. With Claude Code proposing to substantially automate code exploration, documentation, refactoring and security analysis, it threatened to reduce enterprises’ reliance on specialized legacy service providers like IBM, bringing its sustenance at stake.
The Case for QCOM
Qualcomm is well-positioned to meet its long-term revenue targets, driven by solid 5G traction, greater visibility and a diversified revenue stream. The company is increasingly focusing on the seamless transition from a wireless communications firm for the mobile industry to a connected processor company for the intelligent edge. Qualcomm is witnessing healthy traction in EDGE networking, which helps transform connectivity in cars, business enterprises, homes, smart factories, next-generation PCs, wearables and tablets. The automotive telematics and connectivity platforms, digital cockpit and C-V2X solutions are also fueling emerging automotive industry trends such as the growth of connected vehicles, the transformation of the in-car experience and vehicle electrification.
Automakers are increasingly deploying high-performance, low-power computing and connectivity chips to bring next-generation experience to consumers. Management noted that more than 1 million cars are operating ADAS and autonomy on Snapdragon Ride processors, while indicating that commercial shipments of its next-generation digital chassis platform are expected to begin by the end of the fiscal year. The company is strengthening its foothold in the mobile chipsets market with innovative product launches. It had extended its Snapdragon G Series portfolio with the addition of next-generation gaming chipsets, Snapdragon G3 Gen 3, Snapdragon G2 Gen 2 and Snapdragon G1 Gen 2 chips.
Despite efforts to ramp up its AI initiatives, Qualcomm has been facing tough competition from Intel in the AI PC market. Shift in the share among OEMs at the premium tier has reduced Qualcomm's near-term opportunity to sell integrated chipsets from the Snapdragon platform. The company is impeded by memory supply constraints and related pricing, adversely impacting its handset revenues as OEMs (particularly in China) continued to draw down channel inventory. Management reiterated that QCT handset revenues from China-based customers are expected to bottom out in the fiscal third quarter and resume sequential growth in the following quarter as the inventory drawdown eases.
How Do Zacks Estimates Compare for IBM & QCOM?
The Zacks Consensus Estimate for IBM’s 2026 sales implies a year-over-year rise of 5.9%, while that of EPS indicates growth of 7%. EPS estimates have been trending southward (down 0.2%) on average over the past 60 days.
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for Qualcomm’s fiscal 2026 sales suggests a year-over-year fall of 2.8%, while that for EPS implies a decline of 10.3%. The EPS estimates have been trending southward (down 4.8%) over the past 60 days.
Image Source: Zacks Investment Research
Price Performance & Valuation of IBM & QCOM
Over the past year, IBM has plunged 13.5% against the industry’s whopping growth of 208.9%. Qualcomm has gained 57% over the same period.
Image Source: Zacks Investment Research
IBM looks more attractive than Qualcomm from a valuation standpoint. Going by the price/sales ratio, IBM’s shares currently trade at 2.9 forward sales, lower than 5.8 for Qualcomm.
While IBM expects sales to improve in 2026, Qualcomm expects revenues to decrease year over year. Qualcomm has shown a relatively steady revenue growth for years, while IBM has been facing a bumpy road. IBM is trading relatively cheaply compared with Qualcomm, although it has lagged the latter in terms of price performance.
With a stable free cash flow and software-driven revenues leaning toward enterprise SaaS/AI transformation, IBM appears to be comparatively better placed than Qualcomm. Consequently, IBM seems to be a better investment option at the moment.
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IBM vs. Qualcomm: Which AI Tech Stock is the Better Buy Now?
Key Takeaways
International Business Machines Corporation (IBM - Free Report) and Qualcomm Incorporated (QCOM - Free Report) are legacy tech behemoths aggressively expanding into AI infrastructure and enterprise AI solutions, with growing exposure to edge computing and next-generation AI workloads. IBM offers cloud and data solutions that aid enterprises in digital transformation. In addition to hybrid cloud services, the company provides advanced information technology solutions, computer systems, quantum computing and supercomputing solutions, enterprise software, storage systems and microelectronics.
Qualcomm offers high-performance, low-power chip designs for mobile devices, PCs, XR (Extended Reality), automotive, wearable, robotics, connectivity and AI use cases. The company boasts a comprehensive intellectual property portfolio comprising 4G, 5G and other technologies. Qualcomm’s brands include Snapdragon systems-on-chip, FastConnect Wi-Fi and Bluetooth systems, and Qualcomm-branded 4G, 5G and IOT equipment. The company is currently integrating on-device generative AI into all of its product lines.
Let us delve a little deeper into the companies’ competitive dynamics to understand which of the two is relatively better placed in the industry to warrant a place in your investment portfolio.
The Case for IBM
IBM is poised to benefit from healthy demand trends for hybrid cloud and AI, which drive the Software and Consulting segments. The company’s growth is expected to be aided by analytics, cloud computing and security in the long term. With a surge in traditional cloud-native workloads and associated applications, along with a rise in generative AI deployment, there is a radical expansion in the number of cloud workloads that enterprises are currently managing. This has resulted in heterogeneous, dynamic and complex infrastructure strategies, which have led firms to undertake a cloud-agnostic and interoperable approach to highly secure multi-cloud management, translating into a healthy demand for IBM hybrid cloud solutions.
IBM has integrated the open-source Mixtral-8x7B large language model into its watsonx AI and data platform. Mixtral-8x7B's incorporation underscores IBM's dedication to cutting-edge AI research and development. Built on innovative Sparse modeling and the Mixture-of-Experts technique, this model excels in rapid data processing and contextual analysis. Its ability to efficiently handle vast datasets makes it a valuable asset for businesses seeking actionable insights. The optimized version of Mixtral-8x7B, developed by Mistral AI, showcases impressive performance gains. Internal tests reveal a remarkable 50% increase in throughput compared to the standard model. By leveraging quantization techniques to reduce the model size and memory requirements, IBM anticipates significant reductions in latency, potentially ranging from 35% to 75%, depending on batch size.
Despite solid hybrid cloud and AI traction, IBM is facing stiff competition from Amazon.com, Inc.’s (AMZN - Free Report) AWS and Microsoft Corporation’s (MSFT - Free Report) Azure. Increasing pricing pressure is eroding margins, and profitability has trended down over the years, barring occasional spikes. The company faces a potent threat from AI firm Anthropic as the latter’s Claude Code tool can modernize legacy COBOL systems — a foundational programming language deeply embedded in IBM’s mainframe ecosystem. With Claude Code proposing to substantially automate code exploration, documentation, refactoring and security analysis, it threatened to reduce enterprises’ reliance on specialized legacy service providers like IBM, bringing its sustenance at stake.
The Case for QCOM
Qualcomm is well-positioned to meet its long-term revenue targets, driven by solid 5G traction, greater visibility and a diversified revenue stream. The company is increasingly focusing on the seamless transition from a wireless communications firm for the mobile industry to a connected processor company for the intelligent edge. Qualcomm is witnessing healthy traction in EDGE networking, which helps transform connectivity in cars, business enterprises, homes, smart factories, next-generation PCs, wearables and tablets. The automotive telematics and connectivity platforms, digital cockpit and C-V2X solutions are also fueling emerging automotive industry trends such as the growth of connected vehicles, the transformation of the in-car experience and vehicle electrification.
Automakers are increasingly deploying high-performance, low-power computing and connectivity chips to bring next-generation experience to consumers. Management noted that more than 1 million cars are operating ADAS and autonomy on Snapdragon Ride processors, while indicating that commercial shipments of its next-generation digital chassis platform are expected to begin by the end of the fiscal year. The company is strengthening its foothold in the mobile chipsets market with innovative product launches. It had extended its Snapdragon G Series portfolio with the addition of next-generation gaming chipsets, Snapdragon G3 Gen 3, Snapdragon G2 Gen 2 and Snapdragon G1 Gen 2 chips.
Despite efforts to ramp up its AI initiatives, Qualcomm has been facing tough competition from Intel in the AI PC market. Shift in the share among OEMs at the premium tier has reduced Qualcomm's near-term opportunity to sell integrated chipsets from the Snapdragon platform. The company is impeded by memory supply constraints and related pricing, adversely impacting its handset revenues as OEMs (particularly in China) continued to draw down channel inventory. Management reiterated that QCT handset revenues from China-based customers are expected to bottom out in the fiscal third quarter and resume sequential growth in the following quarter as the inventory drawdown eases.
How Do Zacks Estimates Compare for IBM & QCOM?
The Zacks Consensus Estimate for IBM’s 2026 sales implies a year-over-year rise of 5.9%, while that of EPS indicates growth of 7%. EPS estimates have been trending southward (down 0.2%) on average over the past 60 days.
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for Qualcomm’s fiscal 2026 sales suggests a year-over-year fall of 2.8%, while that for EPS implies a decline of 10.3%. The EPS estimates have been trending southward (down 4.8%) over the past 60 days.
Image Source: Zacks Investment Research
Price Performance & Valuation of IBM & QCOM
Over the past year, IBM has plunged 13.5% against the industry’s whopping growth of 208.9%. Qualcomm has gained 57% over the same period.
Image Source: Zacks Investment Research
IBM looks more attractive than Qualcomm from a valuation standpoint. Going by the price/sales ratio, IBM’s shares currently trade at 2.9 forward sales, lower than 5.8 for Qualcomm.
Image Source: Zacks Investment Research
IBM or QCOM: Which is a Better Pick?
Both IBM and Qualcomm carry a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
While IBM expects sales to improve in 2026, Qualcomm expects revenues to decrease year over year. Qualcomm has shown a relatively steady revenue growth for years, while IBM has been facing a bumpy road. IBM is trading relatively cheaply compared with Qualcomm, although it has lagged the latter in terms of price performance.
With a stable free cash flow and software-driven revenues leaning toward enterprise SaaS/AI transformation, IBM appears to be comparatively better placed than Qualcomm. Consequently, IBM seems to be a better investment option at the moment.