Qualcomm Says Amazon May Buy Up to $60 Billion in AI Chips

The latest:

Amazon could buy as much as $60 billion of Qualcomm’s AI data-center chips and related products under a new long-term partnership announced Tuesday, Reuters reported. Qualcomm also granted warrants worth roughly $4 billion that vest with product purchases, priced at $161.26 a share, according to a regulatory filing. The chipmaker’s stock rose more than 3%.

Details:

• The structure: Qualcomm and Amazon will jointly develop chips for AI inference, the market for running already-trained models, Reuters reported. The warrants tied to the agreement vest as Amazon buys products, meaning the equity upside is conditioned on actual purchase volumes rather than granted upfront.
• The equity terms: The regulatory filing set the exercise price at $161.26 per Qualcomm share for warrants valued at about $4 billion. Qualcomm did not disclose a timeline over which the $60 billion in potential purchases would be spread.
• Qualcomm’s target: The company expects its data-center chip business to reach $15 billion in revenue by 2029, according to Reuters. Amazon joins Microsoft and Meta among the cloud and platform customers backing Qualcomm’s year-long push to sell custom AI chips as an alternative to Nvidia’s dominant processors.
• Why now: Qualcomm is working to diversify beyond smartphones as it faces the eventual loss of Apple’s modem business, rising component costs and softer handset demand, Reuters reported. The data-center effort is the centerpiece of that shift.
• The optical piece: The agreement also covers optical communications technology, with the two companies developing high-speed connectivity of up to 1.6 terabits per second to meet AI data-center bandwidth needs. It is a relatively new line for Qualcomm, built on its $2.4 billion acquisition of AlphaWave last year.
• Amazon’s own silicon: Amazon’s in-house custom chip business is already generating an annualized revenue run-rate of more than $25 billion for its cloud unit and continues to expand, according to Reuters — meaning Qualcomm is supplying a partner that also designs competing processors.
• The reciprocal leg: Qualcomm plans to expand its use of AWS infrastructure for its own chip-design workloads to shorten development cycles, making the deal a two-way commercial arrangement rather than a straight supply contract.
• Analyst view: Bob O’Donnell of TECHnalysis Research described the agreement as “exactly the kind of development that Qualcomm needed to reassure the market” on its data-center ambitions, Reuters reported.
• The precedent: Weeks earlier, Marvell Technology struck a custom AI chip partnership with Google that gave the search company rights to buy up to $12.2 billion of Marvell stock, a comparable equity-linked structure now appearing twice in the AI silicon market.

Background:

Nvidia processors dominate AI data centers. Over the past year Qualcomm has courted cloud providers with custom chips and data-center technology as an alternative, seeking large anchor customers to make the business viable at scale.

Between the lines:

The warrant structure ties Amazon’s equity gain to how much it actually buys, which aligns the customer with Qualcomm’s data-center revenue goal rather than simply booking a headline number. That Amazon is signing while its own custom chip unit runs above a $25 billion annualized rate suggests the demand for inference capacity exceeds what any single in-house design program can supply.

What’s next

Watch whether Qualcomm discloses a purchase timeline, how much of the warrant tranche vests in coming quarters, and whether its data-center revenue guidance moves toward the $15 billion 2029 target.