Qualcomm will grant Amazon the right to purchase $4 billion worth of its shares and will supply the tech giant with chips

Qualcomm, the largest developer of processors for mobile devices, announced a “multi-generation” agreement with Amazon, the global leader in cloud computing. Qualcomm plans to develop and supply the tech giant with AI chips worth up to $60 billion. In addition, Amazon will receive warrants (the right to purchase shares) for its assets valued at up to $4 billion, according to documents filed by the company with the SEC.

As part of the partnership, the companies will develop custom chips (designed specifically to meet customer needs) for Amazon Web Services’ AI infrastructure, Qualcomm announced. They will collaborate on both chips for powering AI services and solutions for integrating computing components into server racks.

Under the terms of the deal, Qualcomm issued Amazon a warrant to purchase up to 25 million shares at a price of $161.26 per share, according to documents filed by the company with the Securities and Exchange Commission (SEC). This is 4.4% below the closing price on Friday, September 4 (U.S. stock markets were closed on Monday, September 7). During trading on September 8, Qualcomm’s stock rose another 3.5%.

Amazon will be granted equity in stages, depending on the volume of chip orders: over the next decade, their total value could reach $60 billion, Qualcomm said.

The addition of Amazon to its customer base strengthens Qualcomm’s position as it seeks to gain a foothold in the lucrative market for data center components that support artificial intelligence, according to Bloomberg. The company is seeking to reduce its dependence on the struggling smartphone market and accelerate growth through new areas, including data centers, automotive technology, and personal computers, the agency reports.

Qualcomm is expanding its data center component business in two ways: by selling its own chips and by helping large customers design and manufacture their own processors.

Qualcomm previously announced that Meta Platforms Inc. and the Saudi company Humain would become its clients.

The large-scale development of AI infrastructure is accompanied by numerous agreements between companies that go beyond traditional orders for chips and computer equipment. Suppliers such as Nvidia and Advanced Micro Devices have invested in their customers or offered them stakes in their companies as part of these deals, according to Bloomberg. The companies claim that this practice helps accelerate technology adoption and creates additional incentives for long-term collaboration. Critics, however, express concerns that such agreements effectively amount to circular financing and may create artificial demand.

Amazon and other major cloud computing providers are developing their own alternatives to Nvidia’s popular graphics processing units. Amazon’s Trainium AI accelerator, unveiled in 2020, has already attracted several major customers, including OpenAI, Anthropic, and Uber Technologies, which access these chips through Amazon Web Services. In April, Amazon reported that customer contract commitments related to Trainium exceed $225 billion.

Amazon has long used warrants to acquire stakes in supplier companies in an effort to derive additional value from its own expenditures, Bloomberg notes. The agency explains that the company previously employed this strategy with cargo airlines, as well as truck and van manufacturers that serve its logistics business.

This article was AI-translated and verified by a human editor