Shares of Qualcomm (QCOM) surged on Thursday, adding approximately $16 billion in market capitalization after the chipmaker unveiled an ambitious long-term revenue target for its data center business. The stock climbed 7.6% to $212.34, after hitting an intraday high of $224.00, before retreating to close near its opening level. The rally reflected investor optimism about the company's push into AI-driven data center chips, though the pullback from the session peak suggests some caution remains.
Revenue Target Nearly Doubled
Qualcomm raised its fiscal 2029 non-handset revenue goal to $40 billion, nearly double its previous target. The company now expects data center revenue to exceed $15 billion by that year, with automotive at $10 billion and IoT above $14 billion. Qualcomm's CFO Akash Palkhiwala told investors that the data center unit is expected to generate $5 billion in fiscal 2027, with $1 billion coming from new custom-chip clients. "We will be truly diversified," he said. By 2029, handsets are expected to account for only about a third of QCT revenue, down from the vast majority today.
Key Customers and Partnerships
Microsoft (MSFT) has selected Qualcomm's High Bandwidth Compute chips for AI workloads, while Meta Platforms (META) is using the Dragonfly C1000 CPU. Meta CEO Mark Zuckerberg said the company is "quickly building the infrastructure" needed for its AI push. Qualcomm CEO Cristiano Amon called the Meta CPU partnership "just the beginning." Qualcomm plans to produce its first Dragonfly C1000 CPU for Meta in the second half of 2028. Additionally, Qualcomm's data center head Tony Pialis told Reuters that two more large hyperscale customers have signed up for custom chips, with revenue from them expected before year-end. "I have not had to push my way into hyperscale customers; they've been pulling us in," Pialis said.
Market Reaction and Analyst Views
The stock's move outpaced the broader chip sector, with the iShares Semiconductor ETF (SOXX) up 3.5%. However, the retreat from the $224 peak indicates that some investors remain skeptical about the pace of revenue ramp. Analysts offered mixed reactions. Morgan Stanley (MS) upgraded the stock to neutral and raised its target to $231 from $146. UBS (UBS) lifted its price target to $235 from $170, maintaining a neutral rating. Bank of America (BAC) kept its underperform rating but increased its target to $220 from $195, noting that "meaningful data center success" is already priced in.
AI Inference Demand Driving Growth
Amon emphasized that the shift is not just about demand but also about efficiency. "Agentic AI is driving a significant increase in demand for AI inference in the data center," he said, adding that infrastructure "has to deliver much higher performance at lower power and cost." This focus on power efficiency is a key differentiator for Qualcomm as it competes with established data center players.
Outlook and Investor Focus
Investors are closely watching the two custom-chip programs in the near term, which are ahead of the Meta CPU ramp and include the first revenue milestone management has provided. The company's ability to convert its design wins into sustained revenue will be critical to justifying the current valuation. With the stock's market cap now at $227.6 billion, the market is pricing in significant future success, but the intraday reversal shows that conviction is not yet unanimous.
