Qualcomm (QCOM) on Tuesday said it has entered into a multi-generation custom chip deal with Amazon (AMZN). The companies say they are also developing networking capabilities and other future data center products.
Qualcomm stock climbed more than 5% on the news. Shares of Amazon were flat.
As part of the arrangement, Qualcomm has issued warrants to Amazon for 25 million shares of the company’s common stock at a price of $161.26 per share.
The shares will vest in tranches based on Amazon placing purchase orders and completing those purchases with a total value warrant value of $60 billion.
“Qualcomm is pleased to work with AWS on customized silicon and connectivity solutions, bringing decades of leadership in advanced processing and power-efficient compute, to deliver breakthrough performance and enable the next generation of AI infrastructure,” CEO Cristiano Amon said in a statement.
The move is a big win for Qualcomm, which is working to diversify its business as it seeks to reduce its dependence on revenue from smartphone chip sales.
At its investor day event in June, the company laid out its plans to tackle the data center market, unveiling a line of components and servers and saying that it is nearly doubling its fiscal 2029 non-handset revenue projections to $40 billion.
“We used to be a smartphone company, now we’re an edge device company, and the next phase of Qualcomm is getting into rack scale infrastructure, and this is the proof that we’re doing that in real time,” Qualcomm CFO Akash Palkiwala told Yahoo Finance at the time.
In its most recent quarter, Qualcomm reported revenue of $9.9 billion. Of that, Qualcomm’s CDMA Technologies segment, which includes handset and automotive sales, brought in $8.5 billion.
The company’s Qualcomm Technology Licensing segment, brought in $1.3 billion.
Email Daniel Howley at dhowley@yahoofinance.com. Follow him on Twitter at @DanielHowley.
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