AI data center layout draws investor attention! Qualcomm (QCOM.US) stock price climbs to a two-month high

According to Zhihui Finance APP, as investors are increasingly optimistic about Qualcomm's (QCOM.US) strategy to enter the artificial intelligence (AI) data center infrastructure sector, the chipmaker is receiving more attention. Qualcomm closed up 4.25% on Tuesday at $187.80, reaching a two-month high, and continued to edge up in pre-market trading on Wednesday.

Last week, Qualcomm announced a multi-generation partnership with Amazon (AMZN.US), in which both parties will jointly provide scalable and deployable custom chips for large-scale AI data centers and collaborate on AI inference. Additionally, the two companies will co-develop optical interconnect solutions supporting up to 1.6T speeds and next-generation technologies for the future. Under this long-term arrangement, Amazon may purchase up to $60 billion worth of Qualcomm AI data center chips and related products.

In this collaboration, Qualcomm offered “warrants.” The company granted warrants for 25 million Qualcomm shares at an exercise price of $161.26 per share (meaning Amazon has the right to purchase at this price), corresponding to a value of $4 billion, expiring on September 3, 2036.

This partnership is undoubtedly a major win for Qualcomm. Its significance lies in the fact that Qualcomm has long been viewed primarily as a smartphone chip company. Its business has been highly dependent on the smartphone market, which, compared to AI data centers, grows slower and is more cyclical in demand. Moreover, Qualcomm’s core smartphone business has faced uneven demand for various reasons in recent years. Investors have also long considered Qualcomm’s exposure to Apple as a drag, given Apple’s ongoing efforts to develop its own modem.

Meanwhile, compared to NVIDIA, Broadcom, and other semiconductor stocks, Qualcomm’s involvement in the AI infrastructure boom driven by hyperscale cloud service providers has been relatively limited. As a result, Qualcomm shares have underperformed most other semiconductor stocks during this AI-driven rally.

This agreement with Amazon has changed the narrative, as it not only brings Qualcomm a heavyweight hyperscale cloud service provider as a partner, but also opens a clear path for the company to diversify its business and reduce its reliance on smartphones. Now, the company is targeting AI inference workloads, and its focus on high energy efficiency processing power could help it establish a foothold in the data center sector, reigniting investor interest in the stock.

Qualcomm is partnering with Amazon at a critical moment. Qualcomm’s third-quarter revenue fell 4% to $9.95 billion, while net profit dropped to $2 billion from $2.67 billion a year earlier, due to a 20% drop in phone shipments, rising input costs, and supply chain pressures that dragged down performance. The company also issued a fourth-quarter profit outlook below market expectations.

According to Koyfin data, out of 37 analysts, 23 currently recommend a “hold” rating on Qualcomm stock, 11 rate it “buy” or higher, and 3 suggest “sell” or lower. The average analyst price target is $194.13, indicating a 3.4% potential upside from the previous closing price.

Currently, Qualcomm’s performance is still centered on traditional segments such as smartphones, and the company is eager to shift toward high-growth areas like data centers. Qualcomm has successively acquired Nuvia and Alphawave, thereby building its four business segments in the data center field: custom ASICs, connectivity, AI accelerators, and server CPUs.

Specifically, in the data center field, connectivity products are expected to contribute revenue the fastest. Alphawave, which Qualcomm acquired, already has the capability to produce SerDes IP, 800G optical DSP, and other related products, and its 1.6T products are expected to launch between 2026 and 2027. Qualcomm’s custom ASIC business is also based on the Alphawave Semi acquisition, with custom ASIC products expected to roll out in the first quarter of fiscal 2027—one of the main points in the agreement with Amazon.

Previously, when Qualcomm announced its entry into the data center sector, its share price briefly rose above $250. Even after management provided revenue guidance for the data center business for fiscal years 2027-2029, the share price still fell back to the $150-$160 range. After all, Qualcomm’s data center business has yet to deliver clear revenue contributions, and the market remains “skeptical” about its data center business. This announced partnership with Amazon (including purchase commitments) will undoubtedly increase the “certainty” of growth in its data center business.