Qualcomm Inc. (QCOM) saw its stock rise 11% in pre-market trading after revealing a data center chip deal with Meta Platforms Inc. (META), according to Yahoo Finance. The chipmaker also forecast $15 billion in data center chip sales by 2029, a projection cited by Reuters. The announcement follows a wave of analyst upgrades targeting the stock, with some noting the deal as a “key growth catalyst.”
Qualcomm’s Data Center Chip Breakthrough
Qualcomm unveiled its first data center central processing units (CPUs) in March 2024, marking a shift from its traditional focus on mobile chips. The new processors, designed for AI workloads, are being deployed in Meta’s data centers, according to a company statement. The deal, first reported by qz.com, positions Qualcomm as a direct competitor to industry giants like Intel and AMD in the server chip market.
The chips leverage Qualcomm’s 4nm manufacturing process, which the company claims offers 30% better energy efficiency compared to older technologies. A spokesperson for Qualcomm told Barron’s that the partnership with Meta represents “a strategic milestone” in expanding its enterprise footprint.
Meta’s Role in the Deal
Meta confirmed its collaboration with Qualcomm in a regulatory filing, though details about the scale of the agreement remain undisclosed. The social media giant has been investing heavily in custom AI chips, including its own custom processors for data centers. However, Qualcomm’s entry into this space could offer Meta an alternative to existing suppliers, according to MarketWatch.
Analysts at JMP Securities noted in a research note that Meta’s decision to partner with Qualcomm “signals confidence in the company’s ability to deliver scalable, high-performance solutions for AI infrastructure.” The firm raised its price target for Qualcomm to $135 from $120, citing the deal as a “major tailwind.”
Market Reaction and Analyst Outlook
Qualcomm’s stock initially surged to a 52-week high of $128.50 before retreating to $124.20 in early trading. The volatility reflects mixed investor sentiment, with some questioning whether the data center segment can offset slowing demand in the smartphone market. Reuters reported that Qualcomm’s mobile chip revenue declined 8% year-over-year in Q1 2024.
Despite this, Wall Street has remained optimistic. Goldman Sachs analysts highlighted in a report that Qualcomm’s data center division “could grow at a 40% CAGR through 2028,” driven by increasing adoption of AI and cloud computing. The firm maintained its “buy” rating on the stock, citing “strong secular tailwinds.”
What’s Next for Qualcomm?
The company plans to expand its data center offerings in 2025, with a focus on specialized AI accelerators. Qualcomm’s CEO, Cristiano Amon, stated in a recent earnings call that the data center market “represents a $50 billion opportunity over the next decade.” This aligns with broader industry trends: Gartner forecasts global spending on AI hardware to reach $200 billion by 2026.
Investors will be watching for updates on Meta’s deployment timeline and Qualcomm’s progress in securing additional enterprise clients. A recent Barron’s analysis noted that while the data center market is “highly competitive,” Qualcomm’s “unique blend of AI expertise and manufacturing scale” could give it an edge.