1 incredibly cheap tech stock that could rise 50% thanks to Apple’s generative AI move

Apple (AAPL 0.12%) recently jumped into the fast-growing market for smartphones capable of running generative artificial intelligence (AI) applications. Even though the latest iPhone models won’t receive the company’s Apple Intelligence suite of features until October, demand for the latest devices appears to be good.

JPMorgan Analysts point out that delivery delays for Apple’s new iPhones are widening, which is a sign of healthy demand for these smartphones. Meanwhile, Wedbush Securities’ Dan Ives said he thinks Apple could sell 90 million units of its new smartphones in 2024. That’s up 8 million to 10 million units from last year’s launch.

T-Mobile CEO Mike Sievert goes a step further, saying demand for iPhone 16 models is better than last year. All of this indicates that Apple may strike gold with its latest smartphones, and this will come as no surprise as the generative AI smartphone market is estimated to register a compound annual growth rate (CAGR) of 78% by 2028, according to IDC.

Additionally, there’s a huge installed base of 300 million iPhones that haven’t been updated in at least four years, according to Wedbush, which could trigger a huge upgrade cycle as customers switch to AI smartphones generative.

One way investors can take advantage of robust iPhone 16 sales is to buy Apple stock. However, another company could jump on Apple’s tail and offer handsome earnings thanks to the iPhone 16. Let’s take a closer look at it.

This Apple supplier could get a good boost to its bottom line

Qorvo (QRVO -1.30%) is a well-known supplier of radio frequency (RF) chips used in Apple devices such as iPhones and iPads. The chipmaker is trying to diversify its customer base and supply chips to top Android smartphone makers (OEMs), but it still got 46% of its total revenue from Apple in the previous fiscal year.

As Qorvo’s fortunes appear to be intertwined with Apple’s, the sunny sales outlook for the latest iPhones bodes well. Even better, Qorvo could provide more chip content for the new iPhones and thus make more money on each unit Apple builds.

During its fiscal first quarter 2025 earnings conference call a few months ago, Qorvo management noted that the company is investing in several long-term programs with its largest customer to grow its content and grow in continue the business. Moreover, a Chinese newspaper report Daily economic news in April of this year pointed out that Apple changed the design of the antenna module for its latest generation of iPhones, thereby incorporating more chips from Qorvo.

Not surprisingly, Qorvo’s fiscal first quarter results (for the three months ended June 29) impressed many. The company’s first-quarter revenue rose 36% year-over-year to $887 million. Non-GAAP earnings were $0.87 per share, compared to $0.34 per share last year. Qorvo completed the acquisition of Anokiwave in the fourth quarter of fiscal 2024, and that seems to have given a good boost to the chipmaker’s financial performance. Investors should note that Apple uses Anokiwave offerings on its latest iPhones to improve signal reception.

Therefore, Qorvo could benefit from a combination of stronger volume shipments and higher unit revenue from the new iPhone models. As a result, the margin improvement Qorvo has been seeing lately is likely to continue.

QRVO gross profit margin data by YCharts

This improvement in the company’s margin profile is expected to lead to a healthy growth in the company’s earnings over the next two years.

QRVO EPS estimates for current fiscal year data by YCharts

Investors can expect Qorvo stock to deliver solid earnings

The chart above indicates that Qorvo’s bottom line could grow at an annual rate of 28% over the next two fiscal years. Assuming Qorvo’s earnings do grow to $10.25 per share after three years, and it trades at 15 times forward earnings at that point (in line with its five-year average forward earnings multiple), its stock price could increases to $154. This would be an increase of almost 50% from current levels.

Interestingly, Qorvo is currently trading at 15 times forward earnings, a discount to the US tech sector’s average earnings multiple of 45. That’s why investors should consider buying this undervalued semiconductor stock as strong sales of Apple’s iPhones are set to boost Qorvo’s value. earning power and could send its shares higher over the long term.