A Look at Google’s Suppliers

Looking at rumors isn’t always the most worthwhile activity when it comes to the stock market, but when a rumor gains a foothold in the public’s eye, it needs to be examined, even if it isn’t necessarily true. A rumor can sway markets just because of the strong psychological impact it can have on people, and this alone can make a pervasive rumor move prices, regardless of the facts behind it.

One of the rumors currently circulating is that the Google division of Alphabet is planning on dropping Intel’s server chips, and begin using Qualcomm. Intel is a common name in much of the world, and they have done a huge amount of business with both individual consumers and big businesses, but according to sales reports, the number of personal computers being bought each year is currently on the decline thank to the rise of smartphones and tablets. This has hurt Intel a bit, who has seen their stock drop from a one-year high of over $35.50 to their current price of $28.64. The one-year price estimate for Intel is up over $36 right now, but if Google were to stop purchasing from them, there is no way that this price would ever be obtained. Bloomberg estimates that almost 100 percent of Google’s server chips are purchased from Intel right now. This might not seem like a big deal as these are usually limited purchases with other companies, but Alphabet is the biggest company in the world, and this business is representative of at least tens of millions of dollars, and probably much more.

Qualcomm does not have the same name power as Intel, but winning Google’s business would be a huge boost for them. The company is not doing well right now as their stock price has dropped by more than 40 percent in the last nine months, and if a contract with Google was won, you can expect a big jump in price. Qualcomm is trading at under $45 per share right now down from a high of over $71 in May of 2015. They are suffering for a lot of the same reason that Intel has been, but they don’t have the same level of business to business sales that Intel has, and are not able to compete at the same level. Despite this, experts have said that their price will go up to over $57. They already do business with Amazon and Microsoft when it comes to mobile devices; securing a big portion of Google’s business would allow Qualcomm to surpass this estimate quickly. If this rumor holds water, taking long positions with Qualcomm could be very lucrative.

Traders that do not like to use the traditional stock market cannot benefit much from either of these things. Almost no binary options brokers carry Qualcomm, and only a handful carry Intel. However, everyone carries Alphabet thanks to the fact that they are the largest company in the world right now. Sitting at just over $680 per share right now, experts believe that the company can go up over $920 per share in the coming 52 weeks. This deal may or may not help Google. Even if Qualcomm delivers a higher quality product at a cheap price, the costs of introducing new logistics and contracts may have a short term drop on profits.

However, Alphabet and Google are so successful right now that this deal doesn’t really seem to have any sort of immediate or noticeable impact on their stock price. Pure momentum and fundamental data should be your guide when it comes to trading this powerhouse of a company.