Amazon isn’t waiting for the AI chip market to come to it
Amazon (NASDAQ: AMZN) just added another major supplier to its AI infrastructure buildout.
Qualcomm (NASDAQ: QCOM) will work with Amazon Web Services on multiple generations of customized silicon for AI data centers, including chips aimed at AI inference and high-speed optical connectivity. Amazon also received warrants allowing it to acquire as many as 25 million Qualcomm shares at $161.26 each.
Those warrants vest as Amazon purchases Qualcomm products and services, with milestones connected to as much as $60 billion of potential business. That figure should not be confused with guaranteed revenue, but the structure shows the scale the companies are contemplating.
Qualcomm shares jumped as much as 9.7% before the opening bell and remained more than 7% higher in early trading.
The market reaction makes sense. Qualcomm has spent years trying to prove it can become much more than a smartphone-chip company. Landing AWS gives that effort a level of validation it did not have yesterday.
AWS is becoming the part of Amazon we keep coming back to
The Qualcomm announcement is another reason Amazon remains one of our preferred mega-cap AI names.
AWS revenue grew 37% last quarter to $42.2 billion, its fastest growth in 18 quarters. More impressive, the cloud division generated $16.6 billion of operating income — roughly 60% of Amazon’s total operating profit for the quarter.
AWS also finished the quarter with roughly $496 billion of contracted backlog, while Amazon spent $53.1 billion on capital expenditures during the quarter, largely to support technology infrastructure and AWS growth.
That spending is enormous, but so is the demand sitting behind it.
Amazon isn’t simply renting Nvidia GPUs to customers. It has been building its own Trainium AI accelerators, deploying Nvidia hardware, investing heavily in Anthropic and OpenAI, and now bringing Qualcomm into the custom-silicon mix.
The strategy gives AWS options.
If one supplier becomes too expensive or capacity becomes constrained, Amazon has alternatives. Custom chips can also lower costs, improve performance for specific workloads and give AWS more control over the economics of its cloud.
We’re tracking new names across the AI infrastructure buildout as this spending spreads beyond the obvious winners. Get the latest WSA research →
Qualcomm may have just found its second act
The Qualcomm side may be even more dramatic.
The company still generates a large portion of its business from smartphones, where weaker demand and Apple’s move toward internally designed modem technology have created obvious pressure.
Management has been trying to change that. Qualcomm now targets more than $15 billion of annual data-center revenue by fiscal 2029, alongside major expansion into automotive, industrial AI and robotics.
AWS makes that target look more credible.
The deal also goes beyond processors. Qualcomm and Amazon plan to work on optical connectivity capable of reaching 1.6 terabits per second, addressing one of AI data centers’ growing problems: moving enormous amounts of information between chips quickly enough.
There are still questions. Custom silicon can carry lower margins than Qualcomm’s traditional products, and a framework tied to $60 billion of purchases does not mean those orders will automatically materialize.
But Qualcomm needed proof that major hyperscalers would trust its technology inside their AI infrastructure.
Amazon just provided it.
Amazon may be building something more valuable than a single winning chip
There is a broader pattern forming across the AI market.
Google is designing custom silicon. Microsoft is doing the same. Amazon already has Trainium. Now these hyperscalers are also bringing outside chipmakers into their ecosystems rather than allowing Nvidia — or any single supplier — to control the entire stack.
That competition should ultimately benefit the cloud platforms.
Amazon gets access to more silicon, more bargaining power and more ways to tailor AWS infrastructure to specific customer workloads. Qualcomm gets a path into one of the fastest-growing technology markets in the world.
Our interest in Amazon starts with that position.
AWS sits between the companies building AI models and the enormous amount of computing infrastructure required to run them. The stronger AI demand becomes, the more valuable that position can become.
We have another underfollowed AI name moving up our watchlist. Join the WSA newsletter to see what we’re following →
Qualcomm’s stock move is the immediate story.
Amazon’s ability to keep pulling new suppliers, customers and technologies into AWS may be the more important one.
The AI chip war is becoming more competitive. Amazon looks increasingly comfortable being the marketplace where much of that competition happens.
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