Qualcomm stock jumps 9% on AI chip deal with Amazon, hits 2-month high

Shares of Qualcomm, the largest maker of smartphone processors, gained nearly 9% during trading on Tuesday, 8 September, reaching a day's high of $183.49, their highest level in two months.

The rally came after the company announced that it had signed Amazon.com Inc as a data centre chip customer in a deal that will span “multiple generations” and gives Amazon the right to acquire up to $4 billion worth of Qualcomm shares.

The partnership will involve developing customised silicon to support Amazon Web Services' artificial intelligence infrastructure, Qualcomm said in a statement on Tuesday. The companies will work on chips that run AI services as well as those designed to connect computer components.

Under the terms of the transaction, Qualcomm issued Amazon a warrant to acquire up to 25 million shares at $161.26 apiece. The warrant shares will vest in tranches linked to Amazon's chip orders, with the orders potentially reaching a value of $60 billion over the next decade, Qualcomm said.

The agreement is the latest sign that Qualcomm's efforts to expand beyond its core smartphone business are gaining traction, as the company faces the eventual loss of its modem business from Apple.

Qualcomm expands data centre push

Qualcomm has spent the past year pitching customised chips and other data-centre technologies to cloud providers seeking alternatives to Nvidia's dominant AI processors. Amazon now joins a growing roster of customers supporting Qualcomm's push into the data centre market.

Amazon and other cloud-computing giants have been developing their own alternatives to Nvidia Corp's popular graphics processing units.

“As AI demand accelerates, data centre infrastructure will require advances in both computing and connectivity to deliver greater performance with more efficiency,” said Cristiano Amon, President and CEO of Qualcomm Incorporated. “Qualcomm is pleased to work with AWS on customised silicon and connectivity solutions, bringing decades of leadership in advanced processing and power-efficient compute, to deliver breakthrough performance and enable the next generation of AI infrastructure.”

The partnership comes weeks after Marvell Technology struck a similar custom AI chip deal with Alphabet's Google, giving the tech giant the right to acquire a stake worth up to $12.2 billion.

Under Tuesday's agreement, Qualcomm and Amazon will work together on chips for AI inference, a fast-growing market focused on running trained AI models that has become a key battleground among semiconductor companies.

In June, Qualcomm said it had signed Microsoft and Meta as customers for its new data-centre chips and expected revenue from two custom-chip hyperscale customers before the end of the year. Data centre chip sales are expected to reach $15 billion by 2029.

(With inputs from Reuters and Bloomberg)

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