Qualcomm (NASDAQ: QCOM) shares climbed about 4% in Tuesday trading after the company announced a major collaboration with Amazon Web Services (AWS) to supply custom silicon for large-scale AI data centers. The stock initially surged as much as 10% in early trading before giving back most of those gains, a pattern that suggests some profit-taking after the initial excitement faded.
The multi-generational agreement covers custom chips focused on AI inference—the process by which trained models generate outputs—and includes joint development of optical connectivity solutions up to 1.6T, built on Qualcomm's SerDes and optical DSP technologies. These components are designed to handle the bandwidth demands of AWS's data center networks.
As part of the deal, Qualcomm issued Amazon a warrant to purchase up to 25 million QCOM shares at $161.26 each, according to a regulatory filing. Amazon receives an initial tranche of 3.75 million shares, with the remainder tied to commercial milestones that could total up to $60 billion in business under the agreement. The warrant expires on September 3, 2036.
Qualcomm also said it plans to deepen its own use of AWS infrastructure, including Amazon Bedrock, for electronic design automation work, aiming to shorten its chip design cycles. “As AI demand accelerates, data center infrastructure will require advances in both computing and connectivity to deliver greater performance with more efficiency,” Qualcomm CEO Cristiano Amon said in a joint statement.
The Amazon agreement follows Qualcomm's June 2026 Investor Day, where the company detailed its AI data center strategy, introducing the Dragonfly C1000 CPU and its High Bandwidth Compute architecture, alongside separately announced AI200 and AI250 inference accelerators built for Saudi-backed Humain. At that event, Qualcomm named Meta and Microsoft as its first data center partners, with Meta as a customer for the Dragonfly C1000 CPU (production expected in the second half of 2028) and Microsoft backing Qualcomm's High Bandwidth Compute architecture for Azure. Qualcomm also told investors it was targeting $15 billion in data center revenue by fiscal 2029.
Amazon now becomes Qualcomm's third named hyperscaler relationship, placing the company in a slightly unusual position relative to Amazon's own chip ambitions. AWS already builds its own custom silicon, including the Trainium and Graviton lines, and CEO Andy Jassy said in his April shareholder letter that annualized revenue across Amazon's chip products was already around $20 billion, with a path toward $50 billion if AWS begins selling to outside customers.
The stock has lagged the broader semiconductor sector for most of 2026. On a year-to-date basis, Qualcomm is up around 1.5%, while the VanEck Semiconductor ETF (SMH) is up over 50%. This deal could help close that gap, as it positions Qualcomm more firmly in the AI infrastructure race, a market currently dominated by Nvidia. The pullback from the day's high suggests some investors are taking profits after the initial reaction, but the long-term implications for Qualcomm's data center ambitions are significant.
For context, other chipmakers have also seen AI-driven rallies. For example, Broadcom raised its AI revenue target to $230 billion as custom chip demand surges, and Oracle stock jumped 4% on OpenAI launch and analyst optimism. The AI chip rally has also lifted broader markets, as seen in KOSPI jumping 3% on renewed AI chip enthusiasm.
Investors will be watching to see how Qualcomm executes on this partnership and whether it can translate the Amazon deal into meaningful revenue growth. The company's ability to diversify beyond its traditional smartphone chip business into data center AI will be a key driver of its stock performance in the coming years.
This article is for informational purposes only and does not constitute financial advice.
