It's been nearly two years since Qualcomm (NASDAQ:QCOM) gave up on its $44 billion buyout of NXP Semiconductors (NASDAQ:NXPI). Let's have a look at how the two microchip makers have fared since that fateful day. Should you buy either one of these tech stocks today?

The story so far

NXP and Qualcomm largely focus on completely different target markets. That's why Qualcomm wanted to buy the smaller sector peer in the first place -- the communications and networking specialist was looking for an instant foot in the door in NXP's most important markets of automotive and industrial computing.

Qualcomm's annual sales have increased by 9.3% since the summer of 2018 while NXP's revenues declined by 7.2%. Industrial and automotive computing have been hostile business environments due to the long-running trade war between Washington and Beijing. Qualcomm's sales were helped by worldwide rollouts of 5G wireless networking systems, many of which are built around Qualcomm chips and patents.

Thumbs up and thumbs down in front of many uncut wafers of silicon chips.

Image source: Getty Images.

Hot off the presses

Both companies reported earnings this week, giving investors a glimpse of how each business model is holding up during the COVID-19 crisis.

NXP posted a mixed quarter with soft revenues but strong earnings. Management expects cal sales to bounce back with a vengeance once the world opens up for business again, mainly because a lot of people are likely to get their first car in the post-coronavirus world. Nobody wants to squeeze into crowded mass-transit vehicles until we have an effective cure or a vaccine in place.

All things considered, NXP sees the COVID-19 crisis as a mere speed bump.

"We execute consistently and we are committed to our long-term strategy," CEO-elect Kurt Sievers said in NXP's earnings call.

Qualcomm exceeded Wall Street's expectations across the board with 6% year-over-year revenue growth and 14% higher earnings. Smartphone shipments are running low due to weak consumer demand but the work on 5G infrastructure around the globe continues. The management team saw Qualcomm's long-term prospects unchanged by this health crisis.

"We remain confident in the long-term growth opportunities, including 5G adoption, RF front-end content capture and the expansion of our technologies in adjacent platforms," said CFO Akash Palkhiwala on Qualcomm's earnings call.

Virus risks and valuation

Time will tell if Qualcomm and/or NXP are taking the coronavirus issue too lightly. It isn't in the companies' best interest to do so, and the market's punishment for a blunder will surely be both swift and painful. Executive bonuses are on the line here, not to mention long-term careers. So you can call me naive, but I do believe that NXP and Qualcomm are sharing their best estimates of the rapidly evolving coronavirus threat.

Both stocks can be described as bargains but through different lenses. NXP's stock is trading 29% below the all-time highs it set in February and the shares are currently changing hands at 8.8 times trailing free cash flows. Qualcomm trades 19% below its own all-time highs, reached in January this time. This stock's PEG ratio sits just below 1.0 based on Wall Street's rosy 5-year earnings growth estimates.

A businessman uses a balance scale to weigh coin stacks.

Image source: Getty Images.

The final verdict

In the end, I own NXP shares because I see this company as the best way to benefit from the ever-increasing amount of microchips inside modern cars without picking a winner among car makers. The 5G sector is interesting too, but I see cell tower operator American Tower (NYSE:AMT) as the smarter play on that secular growth opportunity. Sorry, Qualcomm.