BENGALURU (Sept 8): Qualcomm on Tuesday reached a deal to develop custom chips with Amazon for artificial intelligence (AI) data centres, giving it the right to acquire about US$4 billion (RM16.2 billion) in shares in exchange for US$60 billion in business with the chipmaker.

As part of the deal, Qualcomm has granted Amazon a warrant that could allow it to acquire up to US$4 billion of its shares over the next decade. The warrant is tied to the companies' striking business agreements over the period.

Shares of San Diego, California-based Qualcomm rose more than 7% in early trading on Tuesday. The stock has slipped about 1% this year, through last close, as a rebound in August only partly recouped steep losses sparked by weaker smartphone demand.

The warrant lets Amazon buy Qualcomm shares at a fixed price of US$161.26 apiece, according to a regulatory filing.

Such arrangements are becoming more common across the AI supply chain, raising questions among some investors about increasingly intertwined financial relationships as chipmakers offer equity incentives tied to future orders.

The agreement is the latest sign Qualcomm's efforts to expand beyond its core smartphone business are gaining traction, as it faces the eventual loss of its modem business from Apple.

Qualcomm has spent the past year pitching custom chips and other data-centre technology to cloud providers seeking alternatives to Nvidia's dominant AI processors, with Amazon now joining a growing roster of customers that are backing its pivot.

The partnership comes weeks after Marvell Technology struck a similar custom AI chip deal with Alphabet's Google, giving the tech giant the right to buy a stake worth up to US$12.2 billion.

Under Tuesday's deal, Qualcomm and Amazon will work together on chips for AI inference, a fast-growing market focused on running trained AI models that has become a key battleground among semiconductor firms.

The companies will also develop high-speed optical connectivity technologies, including solutions extending to 1.6 terabits per second, to support growing bandwidth demands in AI data centres.

As part of the tie-up, Qualcomm plans to expand its use of Amazon Web Services and infrastructure for chip design workloads, aiming to shorten development cycles.

In June, Qualcomm said it had signed on Microsoft and Meta as customers for its new data-centre chips and expects revenue from two custom-chip hyperscale customers before year end. Data-centre chip sales are expected to hit US$15 billion by 2029.

Uploaded by Tham Yek Lee