HP’s AI Comments Reaffirm This Holding's Diversification Strategy
We like what is shaping up for this Pro Portfolio position.
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In our bid to “connect the dots” as companies continue to report their quarterly results and update their guidance, we’re seeing very nice confirmation for the shift to AI PCs from HP Inc. HPQ. From a Pro Portfolio perspective, that’s a confirming signal for our shares of Qualcomm QCOM as it leans into that market to diversify away from the smartphone market. More companies are targeting the smart glasses market, including Google GOOGL, Samsung SSNLF, and Apple AAPL in a bid to challenge Meta’s META efforts with Ray-Ban.
We’ll factor this morning’s earnings call comments from Best Buy BBY and this afternoon's from Dell DELL into our thinking, but our take is HP’s AI PC comments and those smart glasses efforts should position Qualcomm to show its diversification strategy is paying off in the second half of 2025 and 2026.
Qualcomm has no upcoming events scheduled, but we will continue to track monthly reports from Taiwan Semiconductor TSM and Foxconn, as well as the eventual Q2 2025 PC and smartphone shipment data from third-party research firms like IDC and Canalys. We realize Wall Street will need to see more evidence of Qualcomm’s diversification strategy, but we like what is shaping up.
So, What Did HP Say About AI PCs?
HP shares are getting hammered this morning as its cost structure feels the pinch of tariffs and efforts to address them, but its comments about the AI PC market are of far more interest to us. The company said its Personal Systems quarterly revenue grew 8% in constant currency, due to continued strength in AI PC demand and the Windows 11 Refresh. During the earnings call, management commented it saw significant growth in AI PCs during the quarter on a year-over-year basis, but especially quarter-on-quarter. The team also quickly pointed out that it saw a very modest pull forward in the quarter, less than 1% of its revenue growth, which is lower than we expected.
HP now sees the PC market growing a tad softer than previously forecast this year due to macroeconomic uncertainty and incrementally higher PC costs, owing to tariffs. More specifically, it expects the overall PC market to grow in the low-single-digits for both the second half and full calendar year, but the Win 11 Refresh and AI PC adoption to drive solid revenue growth in the back half of the year. That expectation led HP to reiterate its 2025 target of having AI PCs represent more than 25% of its overall PC business. Helping position HP for that, during the April quarter it introduced mainstream AI PCs and, like other consumer electronics categories, we suspect others will soon follow that move.
At the time of publication, TheStreet Pro Portfolio was long QCOM, GOOGL and META.
