Companies to co-develop next-generation custom AI inference chips, tied to up to $60 billion in purchases over 10 years
Amazon to receive warrants for up to 25 million new shares, worth about $4 billion if fully exercised
Qualcomm targets $15 billion in data center sales by 2029 as shares jump nearly 9% at the open
Qualcomm, a leading maker of smartphone chips, has forged an alliance with Amazon Web Services, the world's largest cloud company, to develop next-generation AI semiconductors. The deal is worth up to $60 billion. Qualcomm aims to extend power-efficiency technology honed in the mobile market to data centers, giving it a new growth engine in the AI chip business. As part of the deal, Amazon will receive warrants for up to 25 million new Qualcomm shares tied to its purchase volume.
Qualcomm said Tuesday (local time) that it had signed a multiyear agreement with AWS to jointly develop custom AI inference chips across multiple generations. The two companies plan to build high-performance, power-efficient chips to meet surging demand for AI bandwidth.
Under the partnership, Qualcomm will contribute the power-efficiency technology and chip design expertise it has built up in mobile semiconductors, while AWS will provide AI infrastructure such as Amazon Bedrock. The two companies also agreed to cooperate on developing ultra-fast, high-bandwidth optical connectivity solutions. As demand grows for inference — putting AI models to work in real-world services — the companies aim to improve not only computing performance but also data transfer speed and power efficiency.
"As AI demand accelerates, data center infrastructure will need advances in both computing and connectivity to efficiently deliver higher performance," Qualcomm CEO Cristiano Amon said. "Building on our decades of leadership in power-efficient computing, Qualcomm will help deliver breakthrough performance and enable the next generation of AI infrastructure."
The agreement also includes equity incentives tied to Amazon's purchase volume. Qualcomm will grant Amazon warrants for common shares at a fixed exercise price of $161.26 per share, scaled to how much Amazon spends on server chips, technology and services.
Qualcomm will initially issue warrants for 3.75 million shares. The total could rise to as many as 25 million shares if Amazon's purchases reach up to $60 billion over the next 10 years. If Amazon acquires and exercises all the warrants, the exercise cost would come to about $4 billion. However, the warrants are separate from the purchase payments Amazon makes to Qualcomm, and their actual acquisition and exercise depend on conditions being met under the contract.
The move is part of Qualcomm's broader push to diversify beyond its smartphone-centered business. While Qualcomm has long dominated the mobile chip market, it has faced growing competitive pressure in recent years. Apple has expanded development of its own smartphone and modem chips, and Samsung Electronics has increased the share of its in-house Exynos chips in Galaxy smartphones instead of Qualcomm's Snapdragon.
In response, Qualcomm is leaning on its power-efficiency technology to enter the AI infrastructure market, setting a goal of raising data center sales to $15 billion by 2029. The company aims to apply the low-power design expertise that gave it an edge in smartphones to large-scale AI computing, opening up a new revenue stream.
Deals combining large-scale chip purchase agreements with equity incentives have become more common in the AI industry. Nvidia rival AMD signed a deal last October granting OpenAI the right to acquire up to a 10 percent stake in AMD based on its chip purchases. More recently, Marvell Technology handed Google warrants worth up to $12.2 billion. As massive sums pour into building AI infrastructure, chipmakers and their large customers are increasingly binding their interests together through long-term purchase agreements and equity stakes.
Markets responded to Qualcomm's AI expansion news. That day, Qualcomm shares jumped nearly 9 percent at the open after news of the partnership broke. The stock later gave back some of its gains, trading around $175, up 3.8 percent from the previous close, as of 1:20 p.m. Eastern time.
sjy@heraldcorp.com
