Qualcomm (NASDAQ: QCOM) shares were among the top gainers on Tuesday, rising 4% despite a broad decline for most stocks on Wall Street. The jump came after the chipmaker announced a major partnership with Amazon (NASDAQ: AMZN) Web Services in the data center space.
Qualcomm informed the Securities and Exchange Commission that Amazon received warrants for 25 million shares. Amazon can purchase these shares at a price of $161.26 each, bringing the total value to approximately $4 billion if all warrants are exercised.
The warrants expire on September 3, 2036, and Amazon gains access to them in stages as certain business milestones are met.
Qualcomm ties Amazon warrants to up to $60 billion in chip orders
One of these milestones could result in a massive volume of business. Qualcomm stated that Amazon could earn a portion of the warrants by "entering into certain commercial agreements" and by purchasing Qualcomm's server chips and other products worth up to $60 billion. Thus, beyond the equity stake, Qualcomm could also secure tens of billions of dollars in hardware orders in the coming years.
The two companies also plan to collaborate across multiple generations of chips. Qualcomm said they will work together "across multiple generations of specialized silicon chips" for Amazon's artificial intelligence systems.
Qualcomm described the rationale as follows: "As AI workloads are growing exponentially, leading to strong demand for compute, storage, networking, memory bandwidth, and energy-efficient infrastructure, this collaboration brings together Amazon’s comprehensive, secure, and cost-effective AI infrastructure with Qualcomm Technologies' leadership in energy-efficient compute, chip design, and system integration."
For a long time, Qualcomm has been known primarily for its smartphone and other mobile device processors. This business segment remains important, but the company is increasingly expanding into data center hardware manufacturing.
This shift became much more apparent in June when Qualcomm unveiled the Dragonfly C1000, a processor designed for data centers. Meta Platforms (NASDAQ: META) plans to use this chip once full-scale production begins in 2028.
The company aims to achieve data center revenue of $15 billion in fiscal year 2029. Its server plans go beyond just processors. Qualcomm is also working on specialized AI chips and another product that will allow multiple processors to be combined and work together.
Now Amazon joins the list of major customers evaluating Qualcomm's hardware. Amazon and Meta spend hundreds of billions of dollars annually on AI infrastructure and other major capital investments.
AI server spending pushes CPUs into fiercer competition in the chip market
Nvidia remains the largest player in the AI hardware market and became the world's most valuable public company largely due to its control of the graphics processing unit (GPU) market. GPUs are widely used for training complex models and performing very resource-intensive AI tasks because they contain thousands of small cores capable of processing many calculations simultaneously.
Central processing units (CPUs) typically contain less powerful cores but are more efficient for performing general-purpose sequential computing tasks. Artificial intelligence requires the use of both CPUs and GPUs, but the growing development of software agents is shifting the focus toward CPUs.
Bank of America (NYSE: BAC) predicts that the CPU market will grow from $27 billion in 2025 to $60 billion by 2030, more than doubling the size of the industry within five years.
Intel (NASDAQ: INTC) and Advanced Micro Devices (NASDAQ: AMD) are already seeing increased demand for data center processors. Nvidia is also actively moving into this market segment. In March, the company shared more details about CPUs created specifically for AI tasks.
The Dow Jones Industrial Average fell 574 points, or 1.1%. The S&P 500 index declined 0.4%, and the Nasdaq Composite index dropped 0.3%.
Investors also faced another rise in oil prices following clashes between the US and Iran over the weekend. The price of West Texas Intermediate crude oil rose for a sixth consecutive session. This was the longest period of gains since a seven-day rise in March.
The price of Brent crude oil was around $98 per barrel.
Rising energy prices became another source of inflationary pressure just before the release of two important US reports. The Producer Price Index for August is expected to be published on Thursday, and the Consumer Price Index on Friday.
These reports came just before the Federal Reserve's meeting on September 15-16. Futures tracked by CME Group (NASDAQ: CME) showed a 58% probability that the Fed would raise its benchmark interest rate by 25 basis points.
Meanwhile, the yield on the 10-year US Treasury note recently reached its highest level since November 2023, and the yield on the 2-year note rose to its highest level since January 2025.
