Amazon Locks In $60 Billion Deal for Qualcomm Chips Amid Shift to Data Centers

Qualcomm, a San Diego-based chipmaker, has struck a $60 billion deal with Amazon for its AI data center chips. As part of this agreement, Amazon also gained the right to purchase up to $4 billion worth of Qualcomm stock over the next decade.

The deal marks a significant shift in Qualcomm's business strategy, which has traditionally relied heavily on smartphone sales. According to CFO and COO Akash Palkhiwala, Qualcomm aims to replace its declining smartphone revenue with data center deals, with projected figures reaching $5 billion by 2027 and $15 billion by 2029.

Qualcomm's niche in low-cost, low-power inference computing has proven attractive to tech giants like Amazon, which is expected to fill the gap left by Apple's departure from Qualcomm. Analysts have welcomed the deal, with some noting it signals a net positive for Qualcomm and its investors.

Rasgon, an analyst at Bernstein, estimated that the initial $9 billion commitment in sales from Amazon implies a significant vote of confidence in Qualcomm's business strategy. Others have cautioned that this deal is not necessarily incremental to existing targets, but rather part of Qualcomm's plan to execute on previously promised hyperscaler partnerships.

Palkhiwala hinted at another major hyperscaler partnership in the works, describing it as a 'very strong engagement', although he declined to name the company involved. With this deal and others like it, Qualcomm appears poised to capitalize on the growing demand for specialized chips in the data center market.