Amazon could purchase up to $60 billion worth of artificial intelligence data-centre chips and related products from Qualcomm under a new long-term partnership that could significantly strengthen the chipmaker’s push into the rapidly expanding AI infrastructure market.
Qualcomm announced the agreement on Tuesday, sending its shares more than three per cent higher as investors welcomed the prospect of a major new revenue stream beyond the company’s traditional smartphone business.
The deal also highlights the increasingly complex financing arrangements emerging alongside the global AI investment boom.
Under the agreement, Qualcomm will grant Amazon warrants valued at about $4 billion. The warrants will vest as Amazon makes qualifying product purchases and will allow the cloud computing giant to acquire Qualcomm shares at $161.26 each, according to a regulatory filing.
Qualcomm seeks life beyond smartphones
The partnership represents an important step in Qualcomm’s efforts to diversify its business as the company confronts several challenges in its core handset market.
Qualcomm is facing the eventual loss of its Apple modem business, increasing component costs and weaker demand for smartphones.
Over the past year, the chipmaker has increasingly targeted cloud-service providers with customised AI processors and data-centre technologies as major technology companies look for alternatives to Nvidia, whose processors currently dominate AI computing.
Amazon now joins Microsoft and Meta as major customers supporting Qualcomm’s push into the data-centre market.
Qualcomm expects its data-centre chip business to generate $15 billion in annual revenue by 2029.
“The deal is 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,” said Bob O'Donnell, chief analyst at TECHnalysis Research.
Focus on AI inference
The partnership will centre partly on chips designed for AI inference — the process of running already-trained artificial intelligence models to produce responses, predictions and other outputs.
AI inference has emerged as one of the fastest-growing areas of the semiconductor industry as businesses increasingly deploy AI applications at scale.
The market has become a key battleground among chipmakers seeking to challenge Nvidia's dominance, with technology companies also developing their own specialised processors to reduce dependence on general-purpose AI accelerators.
Amazon's custom chip business has already become an important growth driver for its cloud division.
The company said its custom silicon business had reached an annualised revenue run-rate of more than $25 billion by the end of the June quarter.
Deal extends into optical technology
The Qualcomm-Amazon partnership will extend beyond computing processors to optical communications technology.
The companies plan to develop high-speed optical connectivity solutions for AI data centres, including technologies capable of supporting speeds of up to 1.6 terabits per second.
The development comes as AI data centres face rapidly increasing demands for bandwidth as they handle increasingly large workloads and increasingly complex models.
The optical communications agreement also represents a vote of confidence in an area that is relatively new to Qualcomm.
The company entered the field more aggressively following its $2.4 billion acquisition of AlphaWave last year. Following the acquisition, AlphaWave chief executive Tony Pialis became Qualcomm's head of data-centre chips.
“By incorporating both compute and optical interconnect, Qualcomm is highlighting the range of semiconductor technologies that they can uniquely bring to AI infrastructure,” O'Donnell said.
Qualcomm to deepen AWS relationship
The agreement will also see Qualcomm increase its use of Amazon Web Services infrastructure for chip-design workloads.
The move is intended to accelerate Qualcomm’s development processes and shorten the time required to design and bring new chips to market.
For Amazon, the partnership provides another opportunity to expand its influence across the AI semiconductor ecosystem while strengthening its position as a provider of the infrastructure required to power next-generation AI services.
For Qualcomm, the potential $60 billion deal provides an important endorsement of its strategy to establish itself as a major supplier of AI data-centre technology.
The agreement comes only weeks after Marvell Technology announced a similar arrangement with Google’s parent company, Alphabet, under which Google received the right to acquire a stake in Marvell worth up to $12.2 billion.
The series of deals illustrates how cloud companies and semiconductor manufacturers are increasingly forging long-term partnerships, combining chip development, infrastructure and financing as competition for control of the AI computing market intensifies.