Artificial intelligence is the talk of the World Economic Forum in Davos, Switzerland. Qualcomm (QCOM) CEO Cristiano Amon joins Yahoo Finance’s Julie Hyman and Brian Sozzi to discuss the state of the semiconductor sector given the surge in AI demand.

Amon notes that “’23 [2023} has been the year of correction” for the smartphone chip sector, but he remains “cautiously optimistic,” about what could happen in 2024.

Amon believes that generative AI is “one of the most exciting things” for the company as it starts to diversify and grow its business.

One challenge that Amon predicts is manufacturing capacity to meet growing demand for chips, including those for AI. ”We’re going to have to double the total capacity of manufacturing of chips before the end of the decade," he says.

This interview is part of Yahoo Finance's exclusive coverage from the World Economic Forum in Davos, Switzerland, where our team will speak to top decision-makers as well as preeminent leaders in business, finance, and politics about the world’s most pressing issues and priorities for the coming year.

Watch this full episode of Yahoo Finance Live here.

Editor's note: This article was written by Eyek Ntekim

Video Transcript

[AUDIO LOGO]

JULIE HYMAN: Welcome back to our live coverage of the World Economic Forum in Davos, Switzerland. I'm Julie Hyman with Brian Sozzi. And of course, we've been talking about all things AI. To power a lot of that AI, we need semiconductors. That's not the only semiconductor news that we got today, however. TSMC, Taiwan Semiconductor said revenues are going to grow as much as 25% this year. So here's someone to talk about all of this. That's Cristiano Amon of Qualcomm, the CEO there. It's great to see you, Cristiano.

CHRISTIANO AMON: Great to see you too.

JULIE HYMAN: First of all, thank you so much for being here. What does this signal, this TSMC forecast about demand, particularly for chips for smartphones, which is your bread and butter?

CHRISTIANO AMON: Look, it's a great question. I'll go back to our last earnings call that for the first time-- '23 has been a year of correction in the industry for a number of reasons. The macroeconomic we're coming off that '21, '22 supply chain crisis. There was a lot of demand. But in the last earnings call, we said that a lot of the corrections were behind us. And we see signs of the smartphone market normalizing it.

So I can't really make predictions at this point about how the year is going to plan out, but I'm cautiously optimistic. Especially on the Android side, we have seen last quarter the market normalize. And you know, I think the TSMC sign's a very positive one. I know that phones are a good proxy of consumer confidence, you know, whether you're going to buy a new phone or not.

BRIAN SOZZI: They're pricey.

CHRISTIANO AMON: Huh?

BRIAN SOZZI: They're pricey.

CHRISTIANO AMON: They have a lot of technology on them. Yeah.

BRIAN SOZZI: There's a lot of AI floating around here. There's installations. There's demos all over the place. How is this new world of gen AI going to impact your outlook for chips?

CHRISTIANO AMON: Look, this is one of the most exciting things for Qualcomm right now, especially when you combine that with what we're doing to diversify and grow the company. We have spent a lot of time creating this computing engine that you can run AI own the devices that are battery powered at the edge-- phone, PC, the AIPC, and cars.

And it's exciting that you can actually-- we did something which is very unique. We can run those large language models on your phone, and you can do them very fast. Like we demonstrated with 8 Gen 3 that just launched right now on Samsung Galaxy S24. I think they just had a great launch showing a number of new AI use cases running on the device.

I think we're going to see coming in the second half of this year next generation Windows PCs with power by X Elite that has a number of models running on the device. Actually, we have OpenAI Whisper model ported. We have over 40 different models ported into the device. And we're working on cars. So this is really exciting. If anything, I will say that's a great tailwind for the Qualcomm growth and diversification.

BRIAN SOZZI: Can you make enough chips to support this growth you're seeing? I hear this from you. I heard it from Lisa Su over at AMD. We've heard it from the NVIDIA team. I mean, how do you feed enough chips into this market?

CHRISTIANO AMON: We don't have an issue. Maybe I should talk about this in a different way. In general, I think especially when you look at all the computation for AI, and data center is a big piece of it right now, I think we will need a significant more capacity for manufacturing of chips.

Even before-- well, we saw the correction of the sector in '23, but the things we said before is still true. We're going to have to double the total capacity for manufacturing of chips before the end of the decade. And AI is just this new computation that has this huge demand for computing. And data center is going to go its own pace.

I think what's exciting about what we're doing is we can do this on the devices, we can do this on phone, we can do this on PCs, we can do on cars. And for that is we think that there's enough capacity. Those are very large industries. And right now, we don't have a capacity problem. But demand could grow very, very fast. We're just the first phase of a transition.

JULIE HYMAN: What's the number one question you're getting here about AI? I mean, as we said, like every conversation we're having is about AI. But you're in it. So what's the question that you're getting from people?

CHRISTIANO AMON: Yes. It varies. One big conversation is, how will this help my industry? And what are the different use cases? And there's an incredible amount of interest in getting that thing on the device. Just think about automotive as an example. Natural language communication is perfect when you are behind the wheel, and the car is now a new computing space, so how can we add those capabilities to some of the models, some that are in development with existing hardware that we have? It's about use cases, how do we get faster.

The other conversation is how we should think about the impact this technology has in the broader ecosystem. How do we keep the platforms open? How do we regulate this in a way that you regulate for the guardrails that are necessary? But at the same time, don't prevent innovation. And most importantly, keep the platforms open because you don't know which model are going to be the model that wins. And it's going to be different models for different applications. And those needs to be available to run on all the platforms.

BRIAN SOZZI: Before we let you go, is there a new piece of AI that has changed your daily working life that you use all the time now?

CHRISTIANO AMON: Well, I have been working with the Microsoft Copilot. It's very helpful, especially to summarize meetings, summarize chats and things like that. That has been useful. I've been experimenting with that. I think as a company, we're doing a lot of things with AI. We have been using AI to a lot of our development, how we streamline access to information database. But I'm going to tell you something which I think-- it's not I'm using. I think that was a very cool thing.

Before we start we're talking, you mentioned about CES. We had a very cool demo of CES a lot of people felt that was very interesting. We worked with our partner BMW, and we got the information that usually have in the glove compartment you don't check, the manual. But also, the service information that exists for particular car model. You see something on the dashboard, you just ask your car, what is that? And the car will explain it to you, will show you what's happening, will tell you what to do.

JULIE HYMAN: I mean, the little light that always goes on, I never know what it is.

CHRISTIANO AMON: Well, you're going to know now. And then it will schedule the service appointment for you.