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Qualcomm to Supply Customized AI Chips to Amazon Web Services' Data Centers

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Qualcomm to Supply Customized AI Chips to Amazon Web Services' Data Centers

Qualcomm (QCOM) will provide custom-built chips and high-speed optical connectivity for the artificial intelligence data centers of Amazon's (AMZN) cloud computing division as part of a collaboration, the companies said Tuesday.

In connection with the partnership, the semiconductor giant issued a warrant to Amazon to acquire up to 25 million Qualcomm common shares at an exercise price of $161.26 per share, according to a regulatory filing.

Qualcomm shares were up 3.7% in Tuesday afternoon trade, while Amazon edged down 0.4%.

"As AI demand accelerates, data center infrastructure will require advances in both computing and connectivity to deliver greater performance with more efficiency," Qualcomm Chief Executive Cristiano Amon said in a statement. "Qualcomm is pleased to work with (Amazon Web Services) on customized silicon and connectivity solutions."

The warrant allows for cashless exercise and is scheduled to expire Sept. 3, 2036, Qualcomm said in the filing. The warrant shares vest in tranches related to the execution of certain commercial arrangements and purchases of QTI's server chip products, technology, systems and manufacturing services by Amazon, up to a maximum amount of $60 billion in payments, according to the filing.

In June, Qualcomm -- which has historically been known for designing and producing mobile phone chips -- said that it was accelerating its diversification roadmap to include AI data centers. The company said at the time it was aiming for more than $15 billion in data center revenue by fiscal 2029.

"By working together on customized silicon and advanced connectivity, we're delivering more performant, efficient, and cost-effective infrastructure for our customers," Prasad Kalyanaraman, vice president AWS, said Tuesday.

Amazon and other hyperscalers are spending huge sums to expand their AI infrastructure footprints globally amid growing demand for AI and cloud services. In July, Amazon raised its full-year capital expenditures outlook to roughly $220 billion from $200 billion, driven by higher memory costs.

Last month, chip designer Marvell Technology (MRVL) entered into a deal that would allow Alphabet's (GOOG, GOOGL) Google to purchase up to $12.18 billion of Marvell shares as part of a collaboration. That deal also involved the issuance of a warrant.

As part of what it described as a "multi-generational product collaboration" with the e-commerce giant, Qualcomm said Tuesday intends to "deepen" its use of AWS AI infrastructure in designing chips.

In June, Qualcomm agreed to acquire software infrastructure firm Modular in a roughly $3.92 billion deal in a bid to bolster its ability to deliver a more optimized AI compute layer.

Price: $175.23, Change: $+6.49, Percent Change: +3.85%

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