Getting your
Trinity Audioplayer ready...By Ian King, Bloomberg Qualcomm Inc. shares jumped after the chipmaker forecast annual sales of more than $15 billion from artificial intelligence components in data centers by fiscal 2029.
The company projected annual revenue of $40 billion for its businesses other than handsets by 2029, which doubles a previous long-range forecast from two years ago. The outlook announced Wednesday at Qualcomm’s investor day in New York includes $10 billion in sales from chips for the automotive industry.
The shares gained as much as 11% Thursday morning in New York. This year Qualcomm’s gains have lagged a general rally by chip stocks as investors concentrated on names more closely associated with spending on AI components.
Qualcomm’s new priority is to win business from the biggest investors in data center gear, joining the competition to cut into Nvidia Corp.’s lead in what has become the most lucrative opportunity in the history of the semiconductor industry. Revenue from that business will be $5 billion by the end of the fiscal year that begins in October, Chief Financial Officer Akash Palkhiwala said at the event.
Chief Executive Officer Cristiano Amon said the use of AI is shifting to agents, specialist models that are good at specific sets of tasks, providing an opening for the type of technology his company provides. Already people in China are showing the way by using AI more naturally with their phones and interacting with their devices to perform multistage tasks — like rescheduling meetings — simply by talking to the handsets, he said.
Amon said his company’s success with designs that have to get by on the limited power provided by phone batteries will help win him orders as new AI data centers push the limits of available electricity. And the spread of AI computing to everyday devices such as cars and eventually robots will create even more opportunities, he added.
“While the jury is still out in terms of the market share Qualcomm can gather in AI infrastructure, the company is firmly entrenched on revenue diversification,” Baird analyst Tristan Gerra wrote in a note. “Qualcomm is firing with a full line of AI offerings including a novel low-power AI architecture comprising accelerators.”
Qualcomm also announced Wednesday that Meta Platforms Inc. has agreed to use the company’s new data center processor in its infrastructure. The parent of Instagram and Facebook will use Qualcomm’s Dragonfly C1000 chip and succeeding generations in its facilities, the San Diego based company said. The microprocessor will be available in 2028.
The tie-up was announced as Qualcomm unveiled a raft of products aimed at capturing a slice of the runaway spending on AI computing. As AI makes its way out of the data center and into everyday life, the chipmaker is betting that a greater variety of devices will need chips that support the technology.
Separately, Qualcomm is optimistic about its chances of extending its data center push into China, despite US government rules on exports of AI-related hardware to that country. Amon said Qualcomm will have versions of its data center chips that don’t trigger restrictions on exports.
Qualcomm has entered the AI data center market with a series of processors and said it will act as a custom designer for companies that want to develop their own components. That makes it a rival for traditional chipmakers such as Nvidia and Intel Corp. and contract design leaders such as Broadcom Inc. Some of the biggest data center operators, including Alphabet Inc.’s Google and Amazon.com Inc.’s Amazon Web Services, buy chips and also have parts made to their own specifications.
Qualcomm’s stock rallied in April after the company said a top hyperscaler — an industry term for the largest data center operators — was on track to begin using its components later this year. Until then, concern that the smartphone market would continue to be squeezed by memory chip shortages had led investors to take a cautious view on Qualcomm’s prospects.
Earlier, Qualcomm said it had reached an agreement to acquire Modular Inc., for about $3.9 billion in stock, adding AI software capabilities to aid its push into data centers.
–With assistance from Zsana Hoskins.
(Updates with stock price move, analyst comment.)
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