Qualcomm Signs Deal to Provide Amazon With Custom AI Chips

Qualcomm Inc., the largest maker of smartphone processors, said it’s signed up Amazon.com Inc. as a data center chip customer in a deal that will span “multiple generations” and gives Amazon the right to acquire as much as $4 billion in shares.

The tie-up will create customized silicon to support Amazon Web Services artificial intelligence infrastructure, Qualcomm said Tuesday in a statement. The two will work on chips that run AI services and others that connect computer components.

Under the terms of the transaction, Qualcomm issued Amazon a warrant to acquire as many as 25 million shares at $161.26 apiece. The warrant shares vest in tranches connected to orders for chips by Amazon up to a value of $60 billion over the next decade, Qualcomm said.

Shares of Qualcomm jumped as much as 8.7% to $183.49 in New York, their biggest intraday gain since June 25. Amazon’s stock fell less than 1%.

Signing Amazon as a customer adds momentum to a push by the chipmaker to muscle into the lucrative market for components of AI data centers. Under Chief Executive Officer Cristiano Amon, Qualcomm is trying to break its dependence on the ailing smartphone industry and fire up growth from new areas including data centers, automotive and PCs.

Qualcomm is pursuing two paths in its data center initiative: selling its own parts and helping large customers design and manufacture their own. Amazon is already one of the largest users of in-house components with processor, networking and AI chip efforts.

Qualcomm has previously announced Meta Platforms Inc. and Saudi Arabia’s Humain will be data center chip customers.

The massive build-out in that AI infrastructure has been marked by numerous tie-ups between companies that involve more than just orders for chips and computers. Vendors such as Nvidia Corp. and Advanced Micro Devices Inc. have invested in their customers or offered up ownership stakes as part of the deals.

They’ve said this helps speed up adoption and adds incentives for long-term relationships. Critics have expressed concerns that these agreements amount to circular financing that risks creating false demand.

Amazon and other cloud computing titans have been developing their own alternatives to Nvidia Corp.’s popular graphics processing units.

Introduced in 2020, Amazon’s AI accelerator, Trainium, has won a few marquee users, including OpenAI, Anthropic PBC and Uber Technologies Inc., which access the hardware via Amazon Web Services. The chip has produced more than $225 billion in revenue commitments, Amazon said in April.

Amazon has long used warrants to scoop up stakes in its suppliers, an effort to capture more of the benefits of its spending. The company has previously deployed the strategy with operators of cargo airlines and builders of trucks and cargo vans who supply its logistics business.