Qualcomm Signs Deal to Provide Amazon With Custom AI Chips

SPEAKER_1 (0:02)

Bloomberg Audio Studios, podcasts, radio, news. Bloomberg Tech is live from the heart of Silicon Valley with Ed Ludlow in San Francisco.

Riley Griffin (0:23)

Coming up, Qualcomm will provide Amazon with custom AI chips in a deal that the company says will expand multiple generations. Meanwhile, another deal falls apart after Anthropic decides against acquiring AI startup, Decart AI.

And all eyes on Apple as the company kicks off its product launch tomorrow with its foldable iPhone, a decade in the making. This is Bloomberg Tech. I'm Riley Griffin in for Ed Ludlow. Let's get a check on the market with Bloomberg's Isabelle Lee, who joins us now. Isabelle, what are you looking at?

Isabelle Lee (0:57)

Hey, Riley, let's get a quick look at the market, especially on this holiday shortened week. You're seeing the NASDAQ here drift lower and lower, down by, honestly, it's almost unchanged, but earlier it was down by a tenth of 1%. And of course, that comes as oil prices soar, flirting with $100 a barrel. It has paired some of those gains, but it's still higher by seven tenths of 1%. This comes after news that Saudi Arabia reported that some of the attacks has caused some of their energy facilities to halt operations. And of course, that's why you see the Brent crew there really rising. They still have a lot of geopolitical uncertainty, and not even the strength of the chip maker. You see the stock here, the semiconductor index popped by more than 2%. Not even that can offset the losses that we are seeing here. And a quick recap of what happened last week. We got a blowout job support that really shocked a lot of investors, and it really raised the stakes on whether we will see a rate hike in the September 16 meeting. And of course, the key data to watch out for now is the Friday CPI data. All eyes will be on that because we've heard a lot of Fed speak, and some of the Fed speakers have said that that will be the key data to watch out for. Let's take a look now at some of the individual movers. You mentioned it at the top of the show, Qualcomm, popping by 5%. It paired back some of those gains, but earlier it soared as much as 9%.

And if it holds that gain, it will be the highest since around June. So you see here really green on your screen there. So to your point, Qualcomm signed a long-term data chip deal with Amazon, one that will span multiple generations. This gives Amazon the right to acquire $4 billion in shares, and the tie-up will create customized silicon to support the AI infrastructure of AWS. So you see a nice healthy gain there, and you see Amazon there down by five-tenths of 1%, Riley.

Riley Griffin (2:34)

Bloomberg's Isabell Lee, thanks so much. For more on Qualcomm and Amazon, Kunjan Sobhani of Bloomberg Intelligence joins us now.

Kunjan, tell us, what exactly is Amazon buying from Qualcomm as announced today?

Kunjan Sobhani (2:49)

Yeah, so this is a portfolio of multiple different products, for multiple different generations. As Qualcomm outlined recently in its Investor Day, which where they didn't mention the customer name, but we believe that first hyperscaler to ramp was Amazon, clear from this deal now. But initially the ramp will be around its custom connectivity chips. So they acquired a company recently where they got a portfolio of connectivity IPs, whether it's 30s, whether it's 1.6 TTSPs.

So this is what initial ramp is going to be. Eventually, it will broaden out into high bandwidth connectivity chips and eventually getting to AI inference accelerator chips. So this will be a broad portfolio, multiple products, multiples over multiple generation, over multiple years.

Riley Griffin (3:34)

Qualcomm is best known for its smartphone processors. I wonder if you could explain to us a little bit about the significance of this deal being for AI infrastructure broadly.

Kunjan Sobhani (3:45)

Yeah, I mean, Qualcomm has been trying to really diversify the revenues away from handsets and they publicly have announced since last year. Also had an investor day where they laid out, they're entering into the data center chip market. It's a big temp for them, a big opportunity.

So this is really, this deal validates their entry. There was a lot of doubts whether them coming in so late, competing with the likes of NVIDIA and AMD and Intel, would they be able to really gain some shares? So this deal puts out some numbers. It's a $60 billion ceiling in terms of the products that Amazon can buy through them. Yes, it is over five to six years, but really validates that they are a serious contender here.