Qualcomm bets on AI chips to break smartphone reliance, but faces crowded race
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June 24 (Reuters) - Qualcomm QCOM.O is expected to use its investor day on Wednesday to lay out a push beyond its core smartphone business into the fast-growing, but highly competitive, market for AI data center chips.
Analysts expect the San Diego-based company to name new customers for its AI chips as it tries to gain a foothold in a market dominated by Nvidia NVDA.O.
The shift reflects mounting pressure in the smartphone market, where Qualcomm is one of the world’s largest chip suppliers to Android device makers.
The sector has been squeezed by a memory chip shortage driven by surging demand for AI infrastructure, while major customers such as Apple AAPL.O and Samsung 005930.KS are increasingly developing chips in-house.
In response, Qualcomm has been expanding into automotive and data center sectors.
The company, which has attempted to boost its data-center business multiple times, is re-entering a fast-growing, but hyper-competitive AI market full of large incumbents such as Nvidia, the newly minted Cerebras CBRS.O and other custom chip options including Amazon's AMZN.O Graviton and Google's GOOGL.O Axion, Bank of America analysts warned in a client note on Tuesday.
Qualcomm said in April that it plans to begin shipping processors and other AI chips for data centers by year-end.
It also said it was working with customers on three kinds of chips: central processing units, inference accelerators, and custom application-specific integrated circuits (ASICs), a segment that has been booming for rivals such as Broadcom AVGO.O and Marvell MRVL.O.
AI inference — running trained AI models — has emerged as a key battleground.
BofA analysts said they expect modest revenue of roughly $2 billion to $5 billion annually from Qualcomm's data center push by fiscal 2027-2028.
Investors will be watching for updated long-term financial targets at the event, including Qualcomm's growth ambitions for its non-handset businesses.
Attention is also likely to focus on its $4 billion all-stock deal for AI software startup Modular, announced earlier on Wednesday, which positions Qualcomm against Nvidia’s proprietary CUDA software that has locked in millions of developers.