Qualcomm CEO on new chip: AI 'evolving different' than cloud

Qualcomm (QCOM) announced a new AI chip — its Snapdragon Elite X — for Windows-operating laptops (MSFT). According to performance tests, the chip matches the peak performances of both Apple's (AAPL) M2 chip and Intel's (INTC) i9-13980Hx. The chip will make its debut next year, along with other new products announced at the Snapdragon Summit in Hawaii.

Qualcomm CEO Cristiano Amon joins Yahoo Finance to discuss the new chip and what the company's plans are moving forward in the mobile processing space.

"Our company has been very focused in diversifying and generating growth to other end markets for Qualcomm beyond mobile. If we look at what's happening with the PC right now, we see too many drivers of innovation and change," Amon says. "The PC is becoming a communication device, the PC is becoming more mobile, more portable, and you have [generative] AI which is changing a lot of the use cases and experience. So for us, it's an incredible growth opportunity."

For more expert insight and the latest market action, click here to watch this full episode of Yahoo Finance Live.

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- Well, Qualcomm is looking to ramp up competition in the PC space, unveiling a new chip, the Snapdragon Elite X for Windows-based laptops. It claims-- Qualcomm, that is-- that it's going to be faster at some operations than Apple's chips for its Mac computers. This chip is set to debut next year. And it's been redesigned to take on artificial intelligence tasks, as well, as have some other new chips coming out from Qualcomm.

Joining us now-- Cristiano Amon, Qualcomm CEO and president, joining us from their Snapdragon conference out in Hawaii. Thank you so much for being here, first of all, Cristiano, and taking the time to talk to us. As always, it's good to catch up with you. Talk to us about this new PC chip in particular. Why is it such a big step for you guys? And what do you think it says about where the industry is pushing right now?

CRISTIANO AMON: Absolutely. Look, good to talk to both of you. Wish you both were here with us in Hawaii, when we're making some very exciting announcement for Qualcomm, probably one of the best summits we've had to date.

But to answer your question, we've been working very hard for many years, waiting for this moment. We have been partnering with Microsoft to build the next-generation PCs. And we just announced the Elite X is-- has the fastest CPU or any battery power mobile computing devices, the fastest CPU of any laptop. It outperformed the competition, both on what you have seen with the M series from Apple, but also even the Intel i9 for gaming laptop.

And that's not only about the CPU. I think what is interesting is about this whole show it's what's happening with gen AI on device. It's evolving a little different than the cloud. And we see incredible opportunities for the Microsoft Copilot with one of the fastest NPU, neural processing unit, highly differentiated from Qualcomm, to process a lot of those gen AI models pervasively, always running natively on this chip.

- And Cristiano, more broadly now with this news, you all are, obviously, making a bet on the future of the PC market that in the quarters, the years ahead, Cristiano, you believe that PC market, obviously, is going to be healthy and strong and vibrant. Why do you believe that, Cristiano? What are the tailwinds you see in the PC market?

CRISTIANO AMON: So Josh, I need to step back and talk about what exactly happened with our company. Our company has been very focused in diversifying and generate growth to other end markets for Qualcomm beyond mobile. If we look at what's happening with the PC right now, we see too many drivers of innovation and change. The PC is becoming a communication device. The PC is becoming more mobile, more portable. And you have gen AI, which is changing a lot of the use cases and the experience.

So for us, it's an incredible growth opportunity since we are not a relevant player in the PC today. And now, all of a sudden, having the chip that has the leadership capabilities and is better suited for those new gen AI experience-- that's a great opportunity for Qualcomm to grow in the market starting in the second half of 2024.

- What are you hearing from customers thus far? And I ask this not just from the customer who's making the PC, but also the end user of the PC because I've read some older reviews of ARM architecture chips in PCs-- the Surface, for example? And they haven't been great, right? So what are the differences that the end user is going to see? And then what kind of demand are you hearing about from folks who make these devices?

CRISTIANO AMON: So it's important to understand that we have been building up to this moment. So we knew, and we've been very clear about that, that we have been working with Microsoft to a number of generations to get the ARM instruction set into the Windows ecosystem. But it's very-- I think we're getting to the place now that we can clearly see that is the new TAM for Qualcomm.

Just pointing out some NVIDIA talk about-- or we saw some news about an ARM CPU development-- the PC is changing from x86 to ARM. And I think what is different now is we have done all of the work with Microsoft to create that ecosystem. Now you can run with Windows 11-- you can run all 64-bit apps, 32-bit apps. And then next year, with Windows AI, you have the gen AI use cases. That's what's different. We've been working to get to this moment. Now we have the silicon. We have the AI experience. And we have a mature ARM ecosystem now in the PC space.

- And Cristiano, the new product you announced-- you argue it beats Apple, it beats Intel. But when you think about these two companies, Cristiano, I mean, these are two big companies with very deep pockets. I think of Intel in particular. I mean, they've got salespeople, Cristiano-- have been selling into the enterprise for 20, 25 years. I mean, these are long-standing relationships. How do you disrupt that?

CRISTIANO AMON: Look, as I just said, it's inevitable. The PC market is transitioning to a different instruction set. And the-- and PC and mobile convergence is happening.

Look, Apple did a fantastic job with the M series. And you saw kind of the devices they built. Our job is to build the same for Microsoft and the Windows ecosystem. That's the mission that we've been assigned. We are very happy with the Microsoft support. And at the end of the day, our job is to build the best possible technology. Microsoft will build the best possible experience. And if that makes a difference for our consumers, they're going to buy this device. It's not because of channel.

- I guess I'm trying to understand, Cristiano. You are, obviously, working closely with Microsoft on this. But Microsoft is also working closely with your competitors on this. So is it-- what is it that is going to put Qualcomm over the edge in an area that it has not traditionally been? Is it going to be the speed? Is it going to be the power? How are you going to outperform and outcompete, kind of to Josh's point here, some of the long-standing participants in the space?

CRISTIANO AMON: Look, I'll look at this question a little bit different, frankly. So you should look at this. We have been working on this for a number of years now. All of a sudden, when Microsoft is getting ready for the next Windows AI, we come up with the fastest mobile processor in the industry, period. And we haven't even started.

And I think everybody is worried about, oh, all this competition. There is change happening. I think we have been reimagining the PC. And at the end of the day, I think leading technology products will drive consumers. That's what happened with the Apple M series. And I think Windows is doing exactly the same thing.

But I will not discount something very important. You just saw Microsoft had incredible earnings results. I think you guys have been talking about that. You see the value of the Copilot for a lot of the enterprises and how they're thinking about-- that's a growth expansion.

We have Microsoft responsible for Windows, driving those user experiences. And I think that's a very powerful force to create an upgrade cycle. And we're excited about that opportunity for Qualcomm in '24.

- And Cristiano, I want to get you out on this. The stock this year, Cristiano-- I'm looking here. You're down about 5% year-to-date. And a big reason there, as you well know-- investors are concerned about the trends they see in the smartphone market. What are you seeing, Cristiano? Six, 12 months from now, what does that smartphone market look like?

CRISTIANO AMON: Look, if-- I think first question, first to comment, is we have been clear that we have seen that the market has been shrinking, as when we look at 2023, it's a smaller market than we have back in 2019. And phone has always been one good proxy of economic and consumer confidence.

If you look at the microeconomics, interest rates, we have seen that consumers had postponed buying a new device. As a result, the market became a little smaller.

However, one exciting thing we're seeing at the show at Maui, which is a lot of our customers are basically building the next phone with a big change in the user experience with gen AI-- and that's very different than how the gen AI is developing on the cloud. That could create a new cycle. It's very hard to predict the phone market. Maybe the worst is behind us, and the new gen AI technologies could create a new cycle. We can't really predict that. But that underscored the reason we're so excited about continuing to differentiate and diversify Qualcomm, finding new end markets for our technology.

- Yeah. And I think people are definitely excited about potential new gen I capabilities in their phones when we start to see more and more of that. Cristiano, obrigado. I'm practicing my Portuguese ahead of a trip to Brazil. So I can thank you in your native language. Cristiano Amon, thank you so much-- really appreciate you taking the time.

CRISTIANO AMON: Thank you. Pleasure talking to you. And safe travels.