Qualcomm (QCOM) shares climbed on Thursday after the company outlined an aggressive expansion into artificial intelligence data centers, raised its long-term revenue targets, and announced new partnerships with Meta Platforms and Microsoft. The stock rose as much as 8% earlier in the session before settling at $205.88, up 4.34%.
AI Data Center Push and Revenue Targets
During its investor day, Qualcomm lifted its fiscal 2029 non-handset revenue target to $40 billion, nearly double its previous guidance. The company also projected $15 billion in data center revenue by that time, signaling a strategic shift away from its traditional reliance on smartphones, tablets, and gaming devices. Qualcomm expects handsets to account for just one-third of total revenue by fiscal 2029, down from 72% in fiscal 2025.
CFO Akash Palkhiwala acknowledged the company's late entry into the data center market but emphasized its technological advantages. "While we're coming in late, we're coming in with technology advantages and something unique that solves the problems that these companies have," he said.
Meta and Microsoft Partnerships
A key highlight was the announcement that Meta Platforms will adopt Qualcomm's new Dragonfly C1000 central processing units when they become available in 2028. Microsoft's Azure cloud division will also use Qualcomm's High Bandwidth Compute (HBC) chip architecture, expected to launch in mid-2027. These deals validate Qualcomm's push into the data center market and provide tangible customer commitments.
Qualcomm also announced on Wednesday that it has agreed to acquire artificial intelligence infrastructure software company Modular in a $3.9 billion all-stock transaction. Modular's technology includes an AI programming language designed to compete with Nvidia's CUDA, supporting Qualcomm's goal of building an open AI software stack. "The entire strategy here is to have an industry standard stack that is completely open source that can be deployed by any customers, on Qualcomm chips, but also on competitive chips," Palkhiwala said.
Analyst Reactions and Competitive Landscape
Analysts were divided on the announcements. KeyBanc's John Vinh noted that while data center targets exceeded expectations, "it's early days," maintaining a Sector Weight rating. Susquehanna analyst Christopher Rolland raised his price target to $190 from $160 but kept a Neutral rating, citing headwinds in the mobile market.
Morgan Stanley upgraded Qualcomm to Equal Weight from Underweight, with analyst Joseph Moore saying the firm had "been wrong to be skeptical." Moore noted that Qualcomm's forecast of $5 billion in AI data center revenue by fiscal 2027 positions the company among emerging beneficiaries of the AI buildout, but described the projected three-year growth trajectory as a "show-me story." BofA maintained an Underperform rating, warning that the stock may already reflect significant expectations for data center success.
The announcements come amid broader volatility in chip stocks, with investors questioning the sustainability of hyperscaler spending on AI infrastructure. Qualcomm's push into data centers positions it against Nvidia, which dominates the AI chip market. The Modular acquisition and open software stack strategy aim to challenge Nvidia's CUDA ecosystem, but execution risks remain.
Qualcomm's diversification strategy is part of a broader trend among chipmakers seeking to reduce reliance on cyclical markets. For context, Broadcom's Tomahawk 6 targets Nvidia's networking stronghold in AI data centers, highlighting the competitive dynamics in this space.
While Qualcomm's long-term targets are ambitious, the company faces significant challenges in winning share from established players. The success of its data center push will depend on execution, customer adoption, and the ability to deliver competitive performance. Investors will be watching for signs of revenue ramp in the coming quarters.
This article is for informational purposes only and does not constitute financial advice.
