Qualcomm (NASDAQ: QCOM) gained 4% on Tuesday, outpacing a broader market decline, following the announcement of a major data center partnership with Amazon Web Services.
Under the agreement, Amazon received warrants covering 25 million Qualcomm shares at an exercise price of $161.26 per share, valuing the warrant package at approximately $4 billion if fully exercised. The warrants expire on September 3, 2036, and will be granted in stages as business milestones are achieved.
Potential for Significant Orders
A key component of the partnership ties warrant grants to Amazon's purchase of up to $60 billion in Qualcomm server chips and related products. The companies also plan to collaborate across multiple generations of customized silicon for Amazon's AI infrastructure.
Qualcomm has been expanding its presence in data center hardware beyond its traditional smartphone processor business. In June, the company introduced the Dragonfly C1000, a data center CPU, and has set a target of $15 billion in data center sales for fiscal 2029. The company is also developing dedicated AI chips and products to interconnect multiple processors.
Broader Shift in AI Infrastructure
Amazon joins other hyperscale companies evaluating Qualcomm hardware for AI workloads. Meta Platforms has committed to using Qualcomm's Dragonfly C1000 chip once full production begins in 2028.
The CPU market is expanding as AI development increasingly focuses on software agents. Bank of America projects the CPU market will grow from $27 billion in 2025 to $60 billion by 2030. Intel, Advanced Micro Devices, and Nvidia are also competing for increased demand in data center processors.
Market Context
Qualcomm's gains stood in contrast to broader market weakness on Tuesday. The Dow Jones Industrial Average fell 574 points, or 1.1%, while the S&P 500 declined 0.4% and the Nasdaq Composite dropped 0.3%.
