Qualcomm Inc. (NASDAQ:QCOM) revealed its intentions to manufacture custom data center CPUs, utilizing technology from Nvidia Corporation (NASDAQ:NVDA) for connection to Nvidia’s AI chips.

What Happened: Qualcomm’s future chips will incorporate Nvidia’s technology, facilitating rapid communication with Nvidia’s graphics processors (GPUs), a vital part of its AI chip portfolio. This development signifies Qualcomm’s re-entry into the data center CPU market, a space typically ruled by Intel (NASDAQ:INTC) and Advanced Micro Devices (NASDAQ:AMD), said the company on Monday at a presentation at Computex in Taipei, Taiwan, reported Reuters.

Previously, Qualcomm had begun developing an Arm-based (NASDAQ:ARM) CPU in partnership with Meta Platforms (NASDAQ:META), but had to stop due to cost reductions and legal obstacles. However, after bringing on board a team of former Apple (NASDAQ:AAPL) chip designers in 2021, Qualcomm has quietly revived its efforts and is once again in talks with Meta regarding a data center CPU.

Qualcomm recently confirmed a partnership with Saudi AI firm Humain to develop a custom data center CPU. "With the ability to connect our custom processors to Nvidia’s rack-scale architecture, we’re advancing a shared vision of high-performance energy-efficient computing to the data center," said CEO Cristiano Amon.

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Why It Matters:  This move comes as part of Qualcomm’s broader strategy to diversify its revenue streams. Qualcomm aims to generate $22 billion in non-handset revenue by 2029, with AI being a key driver. The collaboration with Nvidia and the development of custom data center CPUs align with this goal.

Moreover, association with Nvidia's infrastructure is crucial for any company aiming to break into the data center market, given the central role the Jensen Huang-led company’s semiconductors play in AI.

Despite delivering Q2 results that surpassed Wall Street predictions, Qualcomm’s shares have dipped 4.6% over the past week. The company’s foray into the data center CPU market could potentially bolster its performance in the stock market.

Qualcomm holds a momentum rating of 28.77% and a growth rating of 59.61%, according to Benzinga's Proprietary Edge Rankings. The Benzinga Growth metric evaluates a stock’s historical earnings and revenue expansion across multiple timeframes, prioritizing both long-term trends and recent performance.

Over the past month, the shares of Qualcomm Inc. surged 12.02%.

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Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.