Qualcomm Partners with Amazon for AI Chip Development in $60 Billion Deal

Qualcomm has secured a major deal with Amazon, leading to a notable surge in its stock price, which rose approximately 7-10% following the announcement. This partnership, revealed on September 8, aims to create custom AI inference chips specifically designed for Amazon Web Services (AWS) data centers.

The collaboration encompasses multiple generations of custom silicon tailored for AI workloads, alongside advanced optical connectivity solutions capable of achieving speeds exceeding 1.6 terabits per second. Qualcomm is leveraging its proprietary SerDes and optical DSP technologies to enhance this initiative.

As part of the agreement, Amazon has been granted a warrant to purchase up to 25 million Qualcomm shares at an exercise price of $161.26, with a potential value of around $4 billion. The vesting of these shares is contingent upon commercial commitments that could amount to $60 billion, with an initial tranche of 3.75 million shares being issued immediately.

Qualcomm's CFO, Akash Palkhiwala, indicated that this partnership is expected to significantly boost the company's revenue growth, particularly in fiscal years 2027 and 2028. The deal aligns with Qualcomm's strategy to diversify beyond its traditional smartphone market, having already established partnerships with major players like Meta and Microsoft.

Looking ahead, Qualcomm aims to generate $5 billion in data center revenue by fiscal 2027, increasing to $15 billion by fiscal 2029, with a broader goal of achieving $40 billion in total non-handset chip revenue by the same year.