Qualcomm (QCOM 2.14%) stock shed about 2.5% through 12:30 p.m. ET on Tuesday, but the reasons why relate more to what's happening at a rival chip company than to anything occurring at Qualcomm itself.

If you are unfamiliar with MediaTek, it's worth getting acquainted. With a market capitalization of $47 billion, the Taiwan-based "fabless" semiconductor producer is barely one-third of Qualcomm's size. Yet it has been making some impressive moves this week.

Meet MediaTek

Late Monday night, CNET reported that MediaTek is taking a page from Qualcomm's book, aiming to get in on the artificial intelligence action by building a new chip that will make it easier to use "ChatGPT-like" AI services "on-device" on smartphones. The significance of "on-device" is that it aims to provide smartphones with enough internal processing power to give useful AI responses to questions without pinging a data center for a cloud-based answer. This will be especially useful when a device can't get a wireless connection, for example, and can't access the cloud.

For its part, Qualcomm recently launched its Gen3 Snapdragon 8 chips for high-end smartphones, and cheaper Gen3 Snapdragon 7 chips for lower-end phones, aiming to enable both tiers of devices to provide AI responses to user questions. MediaTek's answer to this was to launch a Dimensity 8300 chip to accompany its own Dimensity 9300 chip for the same purposes (and the same markets).

Obviously, competition from MediaTek is liable to eat into Qualcomm's market share in this segment somewhat -- but that was not the only good news for MediaTek this week.

Facebook loves MediaTek

In a second (perhaps unrelated) story earlier on Monday, smartphone-focused PhoneArena.com reported that Meta Platforms (META -2.41%) has picked MediaTek over Qualcomm to provide chips for its first generation of augmented reality (AR) glasses.

A beta edition of those AR glasses for use only by developers is expected to arrive next year. But Reuters has reported that the rollout of those AR glasses for consumers is scheduled for 2027. Thus, while this news isn't an immediate negative for Qualcomm, it does suggest that some of the revenue growth the company could have accrued by supplying chips to Meta, it now will not enjoy -- because MediaTek got the contract instead.

After a 20% run-up over the past month that has it trading at 20 times trailing earnings, Qualcomm stock no longer looks particularly cheap. And this week's news gives investors more reasons to feel a bit less enthusiastic about the chip company.