Qualcomm strikes AI chip deal with Amazon, offers right to buy about $4 billion in stock

Sept 8 — Qualcomm on Tuesday reached a deal to develop custom chips with Amazon for AI data centers, giving ​it the right to acquire about $4 billion in shares in exchange for $60 billion in business with the chipmaker.

As part of the deal, Qualcomm has granted Amazon a warrant ‌that could allow it to acquire up to $4 billion of its shares over the next decade. The warrant is tied ⁠to the companies' striking business agreements over ​the period.

Shares of San Diego, California-based Qualcomm rose ⁠more than 7% in early trading. The stock has slipped about 1% this year, through ‌last close, as a ‌rebound in August only partly recouped steep losses sparked by weaker smartphone demand.

The warrant ⁠lets Amazon buy Qualcomm shares at a fixed price ⁠of $161.26 apiece, according to a regulatory filing.

Such arrangements are becoming more common across the AI supply chain, raising questions among some investors about increasingly intertwined financial relationships as chipmakers offer equity incentives tied to future orders.

The agreement is the latest sign Qualcomm's efforts to expand beyond its core smartphone business are gaining traction, as it faces the eventual ‌loss of its modem business from Apple.

Qualcomm has spent the ​past year pitching custom chips and other data-center technology to cloud providers seeking alternatives to Nvidia's dominant AI processors, with Amazon now joining a growing roster of customers that are backing its pivot.

The partnership comes weeks after Marvell Technology struck a similar custom AI chip deal with Alphabet's Google, giving the tech giant the right to buy a stake worth up to $12.2 billion.

Under Tuesday's deal, Qualcomm and Amazon will work together on chips for AI ​inference, a fast-growing market focused on running trained AI models that has become a key battleground among semiconductor ‌firms.

The companies will ‌also develop high-speed ⁠optical connectivity technologies, including solutions extending to 1.6 terabits per second, to support growing bandwidth demands in AI data centers.

As part of the tie-up, Qualcomm plans to expand its use of AWS services and infrastructure for chip design workloads, aiming to shorten development cycles.

In June, Qualcomm said it ‌had signed on Microsoft and Meta ​as customers for its new data-center chips and expects ‌revenue from two custom-chip hyperscale ⁠customers before the ​year-end. Data-center chip sales are expected to hit $15 billion by 2029.

(Reporting by Anhata Rooprai in Bengaluru; Editing ​by Pooja Desai)

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