Missed the boat on Nvidia’s booming artificial intelligence-fueled rally? Investors can still get on the A.I. bandwagon with this age-old chip darling. While the Nvidia (NVDA) gravy train may seem to have left the station for many, Qualcomm (QCOM) remains a compelling alternative for investors hungry to participate in the AI revolution. In Qualcomm’s recent earnings call, CEO Cristiano Amon hinted at the launch of Snapdragon X Elite CPU alongside the “next version” of Windows, expected around mid-2024. While specifics about Windows 12 remain murky, the integration of AI-specific features hints at a significant focus on AI hardware. This aligns well with Qualcomm’s Snapdragon platform, which is already primed for AI integration and extends into various industries. Earnings reactions are always unpredictable and despite beating its quarterly revenue and earnings estimates, and providing strong forward guidance, QCOM fell 5% last Thursday. While this may seem counterintuitive, especially amid a broader rally in the chip sector, it could signal a potential buying opportunity. Shown below is a 6-month daily chart of QCOM. Note that after the 5% post earnings drop, QCOM is showing signs of recovery, as indicated by higher highs, higher lows, and a rising RSI (relative strength index). To go bullish on QCOM, the trade structure I have used here is called a “bull call spread”. You may find trading platforms using other names like “call debit spread” or “long call spread”. To construct my bull call spread, I need to do buy a $140 call and sell a $145 call as a single unit. The trade Here is my exact trade setup: Buy $140 call, Feb. 16 expiry Sell $145 call, Feb. 16 expiry Cost: $250 Potential Profit: $250 I have chosen Feb. 16 as the expiration for this trade which is only 11 days away. The reasoning behind this is that NVDA has its earnings coming up on Feb. 21, which is a huge risk for trades on any chip stock. The goal here is to ride the wave of optimism as NVDA’s earnings approach and close the trade before the earnings event. Profit target If QCOM trades at or above $145 by the expiration date, this trade could yield a return of 100% on the amount risked. QCOM 1Y mountain Qualcomm, 1 year With 10 contracts, this equates to risking $2500 to potentially gain $2500 -Nishant Pant Founder: https://tradingextremes.com Author: Mean Reversion Trading Youtube, Twitter: @TheMeanTrader DISCLOSURES: (None) THE ABOVE CONTENT IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY . THIS CONTENT IS PROVIDED FOR INFORMATIONAL PURPOSES ONLY AND DOES NOT CONSITUTE FINANCIAL, INVESTMENT, TAX OR LEGAL ADVICE OR A RECOMMENDATION TO BUY ANY SECURITY OR OTHER FINANCIAL ASSET. THE CONTENT IS GENERAL IN NATURE AND DOES NOT REFLECT ANY INDIVIDUAL’S UNIQUE PERSONAL CIRCUMSTANCES. THE ABOVE CONTENT MIGHT NOT BE SUITABLE FOR YOUR PARTICULAR CIRCUMSTANCES. BEFORE MAKING ANY FINANCIAL DECISIONS, YOU SHOULD STRONGLY CONSIDER SEEKING ADVICE FROM YOUR OWN FINANCIAL OR INVESTMENT ADVISOR. Click here for the full disclaimer.
