TLDR
- Amazon Web Services struck a long-term agreement to acquire as much as $60 billion in AI data-center chips from Qualcomm.
- The partnership includes approximately $4 billion in stock warrants for Amazon to purchase QCOM shares at $161.26 each.
- Shares of QCOM surged 6.9% following the deal disclosure and have climbed roughly 9% month-to-date.
- Analysts at RBC Capital increased their price target to $180, while Piper Sandler issued an upgrade on the stock.
- The company aims to generate $15 billion in data-center chip sales by 2029 as part of its diversification strategy beyond mobile devices.
On September 8, Qualcomm and Amazon Web Services unveiled a sweeping multi-generation chip collaboration that propelled QCOM shares higher. The arrangement allows AWS to procure up to $60 billion in Qualcomm’s AI data-center chips and associated products across multiple phases.
As part of the agreement, Amazon secured stock warrants valued at approximately $4 billion, granting the e-commerce giant the right to purchase QCOM shares at $161.26 apiece. These warrants become exercisable progressively as Amazon fulfills product purchase commitments, creating a direct link between Amazon’s equity position and its chip procurement volume.
Shares of QCOM rallied as much as 6.9% on announcement day, reaching an intraday peak of $180.41. Beginning at $165.71 on September 1, the stock advanced to $180.15 by September 14, representing an approximately 8.71% monthly increase.
The collaboration encompasses custom silicon engineered for AI inference workloadsāthe computational process of deploying trained artificial intelligence models. Additionally, the partnership includes advanced optical connectivity solutions, with capabilities reaching 1.6 terabits per second to accommodate escalating bandwidth requirements within AI data centers.
The optical technology stems from Qualcomm’s $2.4 billion AlphaWave acquisition completed last year. Tony Pialis, who previously served as AlphaWave’s chief executive, currently oversees Qualcomm’s data-center chip operations.
Wall Street Responds
On September 9, RBC Capital elevated its price target on QCOM to $180 from a previous $160, while maintaining its Sector Perform rating. Piper Sandler followed with an upgrade two days later as QCOM gained an additional 3.23% on September 11.
Current analyst consensus places the average price target around $194, based on available Wall Street data.
Some profit-taking emerged after the initial surge due to dilution worries related to the warrant issuance, though QCOM has retained the majority of its post-announcement gains.
Bob O’Donnell, chief analyst at TECHnalysis Research, characterized the partnership as “exactly the kind of development that Qualcomm needed to reassure the market that the lofty data-center ambitions they set for themselves could indeed be met.”
Qualcomm’s Bigger Picture
With this agreement, Amazon becomes the third major cloud provider supporting Qualcomm’s AI infrastructure expansion, joining Microsoft and Meta. Qualcomm has been aggressively pursuing hyperscale cloud operators with custom silicon offerings positioned as alternatives to Nvidia’s market-leading processors.
Company leadership has established a goal of achieving $15 billion in annual data-center chip revenue by 2029. Qualcomm is simultaneously scaling its Snapdragon X2 Elite platform and executing widespread price adjustments across its chip lineup to protect profitability.
The AWS partnership also encompasses plans for Qualcomm to increase its utilization of Amazon’s cloud infrastructure for chip design activities, with objectives centered on accelerating development timelines.
This strategic agreement arrives as Qualcomm navigates the anticipated loss of its Apple modem contract, escalating component expenses, and softening smartphone demand in certain market segments. The Amazon partnership establishes a substantial revenue stream independent of the mobile phone sector.
Amazon’s custom chip operations achieved an annualized revenue run-rate exceeding $25 billion at the conclusion of the June quarter, establishing it as a critical growth catalyst for AWS.
Piper Sandler’s upgrade materialized on September 11, coinciding with a 3.23% gain in QCOM shares that day, sustaining the upward momentum initiated by the partnership announcement.
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