Qualcomm Incorporated (NASDAQ: QCOM) saw its shares climb 1.8% to $189.83 in early trading Wednesday, after briefly touching an intraday high of $200.34. The move extends a rally fueled by growing investor enthusiasm for the company's expansion into artificial intelligence data center chips and a newly disclosed custom silicon agreement with a major cloud provider.
AI Data Center Bet Drives Sentiment
The stock's surge comes as the broader semiconductor sector gains momentum, partly thanks to Advanced Micro Devices' optimistic forecast, which lifted chip stocks across the board. According to Reuters, Qualcomm popped 5.1% alongside gains in Intel and Arm. Investors are increasingly shifting their focus from graphics processing units used for AI training to central processors and inference hardware critical for deploying AI models.
Qualcomm's narrative is evolving. Last week, the San Diego-based company revealed it has secured a custom chip deal with a large hyperscaler—industry jargon for a major cloud computing provider—with first shipments expected later this calendar year. On the earnings call, CEO Cristiano Amon declined to name the customer, describing it only as a large hyperscaler and hinting at a multi-generation partnership. CFO Akash Palkhiwala added that the project is expected to be accretive at the operating margin level.
Fiscal Q2 Results: Mixed Bag
Qualcomm reported fiscal second-quarter revenue of $10.6 billion and non-GAAP earnings of $2.65 per share. However, its QCT chip unit slipped 4% year-over-year. Handset sales tumbled 13%, while automotive revenue surged 38% and Internet of Things sales rose 9%. The company guided fiscal Q3 revenue between $9.2 billion and $10.0 billion, with non-GAAP EPS of $2.10 to $2.30, citing tight memory supplies and pricing pressure that have dampened demand among handset makers.
CEO Amon told Reuters he sees the smartphone market bottoming out after the fiscal third quarter, noting that Qualcomm's licensing segment provides a preview of handset makers' plans for later in the year.
Market Context and Analyst Views
The AI trade is tightening. AMD's comments on server CPUs triggered gains for Intel and Arm as well, as investors bet that AI inference will drive spending beyond just graphics chips. "Success invites competition," said Michael O'Rourke, chief market strategist at JonesTrading, to Reuters. Matt Britzman of Hargreaves Lansdown described the opportunity as a "broader compute opportunity."
Qualcomm is leveraging its mobile and low-power chip design expertise to target larger platforms. CEO Amon outlined efforts spanning CPUs, inference accelerators, and custom ASICs tailored for single customers. Bob O'Donnell of TECHnalysis Research told Reuters that Qualcomm starts from a modest position but sees "maturation of their strategy and offerings."
Risks and Upcoming Catalysts
Despite the optimism, risks remain. The hyperscaler deal's revenue potential is unclear, and first shipments are still in early stages. Qualcomm's June-quarter outlook factors in soft handset sales and ongoing memory supply drag. Some analysts pushed back on Amon's view that the memory shortage is over, according to Reuters.
Investors will get more clarity on June 24, when Qualcomm holds its investor day in New York. Management is expected to highlight AI efforts across connected devices and data centers, but analysts will press for specifics on the data center offering, addressable market size, and whether the company known for phones can sustain momentum with an AI server push.
