Qualcomm will produce AI chips for Meta's data centers. Its stock soared

Mobile processor manufacturer Qualcomm announced at its investor day that it has nearly doubled its revenue target for non-smartphone businesses for 2029. This is due to the chipmaker’s entry into the server AI processor market: Qualcomm will produce chips for Meta Platforms’ data centers, according to MarketWatch. Following this announcement, at least 11 analysts covering the chipmaker’s stock raised their price targets.

In fiscal year 2029, Qualcomm expects revenue from non-smartphone business segments to reach $40 billion. The previous forecast was $22 billion. By that time, the company estimates that revenue from data center chip shipments will exceed $15 billion.

Among the reasons for revising the forecast is a new agreement with Meta Platforms, which the company announced at its investor day: the chipmaker will supply custom processors for the data centers of Meta, the owner of social media platforms Meta and Instagram. The Dragonfly C1000 processor will be used in Meta’s server fleet, the company said. Production of the chip will begin in the second half of 2028.

Qualcomm may have entered the race for data centers and specialized chips late, but analysts at the company’s investor day on Wednesday enthusiastically welcomed its plans to diversify its business beyond the smartphone segment, MarketWatch notes.

During Thursday's trading session, Qualcomm shares rose as much as 11% to $219.43. They are up 20% year-to-date.

On June 25, at least 11 analysts revised their ratings on Qualcomm shares following the investor day. Most of them note that the company successfully used the event to showcase its growth potential beyond the smartphone sector, particularly in the segment of AI chips for data centers.

Benchmark set the highest target on this list: the bank raised its forecast from $225 to $300, according to MarketScreener. This is 52% higher than the closing price on June 24. Rosenblatt Securities, RBC Capital, and Barclays also set high price targets—$265, $250, and $245, respectively. Most analysts who reviewed the estimates raised their price targets above $220; the exceptions were Citi and Susquehanna, whose expectations remained below $200.

Citi raised its price target from $160 to $198 while maintaining a neutral rating, according to TipRanks. This is nearly at Wednesday’s closing price. In its view, Qualcomm’s long-term diversification has become more compelling, but the near-term outlook remains constrained by weakness in the smartphone market.

Susquehanna was the only firm whose target price of $190 was below the closing price on June 24: the bank expects Qualcomm’s stock to fall by 3.7%.

Morgan Stanley upgraded its rating on Qualcomm shares from “underweight” to “neutral” and raised its price target from $146 to $231, according to Investing.com. Analyst Joseph Moore acknowledged that Morgan Stanley’s skepticism regarding Qualcomm’s entry into the data center market had been excessive, but he still prefers more established players in the sector.

According to MarketWatch, 23 out of 39 analysts recommend holding the chipmaker's stock (Hold), while 13 more recommend buying it and three recommend selling it. The Wall Street consensus price is $212.3.

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