Qualcomm Stock Spikes as It Bags Massive Data Center Deal With Amazon

Earlier this week, Qualcomm (QCOM) landed one of the biggest deals in its history, and Wall Street noticed right away. The company announced a multi-generation partnership with Amazon (AMZN) on Sept. 8, according to a company statement. The deal covers custom chips for AI data centers and new optical connectivity technology.

Qualcomm's stock climbed on the news as investors welcomed proof that the company's push into data centers is finally paying off. Valued at a market cap of $188 billion, the smartphone chipmaker has returned 280% to shareholders in dividend-adjusted gains. However, it also still trades 30% below all-time highs.

Why Qualcomm Needed This Data Center Win

Qualcomm has spent years trying to reduce its reliance on phones. It built out businesses in automotive chips and internet-connected devices. But data centers were the missing piece, and investors wanted proof the company could compete in this rapidly expanding AI segment.

Qualcomm Chief Financial Officer and Chief Operating Officer Akash Palkhiwala addressed this directly at the Goldman Sachs Communacopia and Technology Conference on Sept. 8. He called the Amazon partnership "a landmark deal for us in the data center business" that "kicks us off there."

Just months ago at its Investor Day, Qualcomm set a target of $5 billion in data center revenue for fiscal 2027 and $15 billion by fiscal 2029.

Palkhiwala said the Amazon agreement makes that fiscal 2027 number "very high confidence" because the company already has purchase orders and is building chips today. Revenue from the partnership starts flowing in the December quarter.

According to the company statement, the collaboration has two main parts.

First, Qualcomm will build customized silicon for Amazon Web Services across multiple product generations.

Second, the two companies will work together on optical connectivity solutions, starting at 1.6 terabits per second and moving to future generations.

Qualcomm will also lean more on AWS tools, including Amazon Bedrock, to speed up its own chip design work. Qualcomm will issue warrants tied to as much as $60 billion in Amazon purchases of data center products over the next 10 years. About 15% of those warrants vest upfront, tied to commitments Amazon is making right now.