Wall Street bullish on Qualcomm’s entry into data center race, but there's a catch

Qualcomm (QCOM) went all-in on the data center race on Monday, announcing the launch of the Qualcomm AI200 and AI250 chip-based accelerator cards and racks, as well as a deal with HUMAIN, a Saudi Arabian private investment fund (PIF), to deliver high-performance AI inference services.

The company made the announcements ahead of the annual ​​Future Investment Initiative (FII) conference in Riyadh, Saudi Arabia.

As part of its deal with HUMAIN, Qualcomm will deliver 200 megawatts AI200 and AI250 rack solutions to provide power across Saudi Arabia.

The launch of the AI chips is seen as putting Qualcomm in direct competition with Nvidia (NVDA), making it the latest tech giant taking aim at Nvidia’s dominance in the industry.

The company said that each A1200 chip card supports 768 GB of Low-Power Double Data Rate (LPDDR) — which is a type of RAM — that it claims delivers higher memory capacity at lower cost. The chip is designed for large language models (LLMs) and large multimodal models (LMM).

Its AI2500 chip has what Qualcomm calls “an innovative memory architecture” that is based on near-memory computing. The company said that it will provide “a generational leap in efficiency and performance for AI inference workloads.”

Durga Malladi, SVP & GM of Technology Planning, Edge Solutions & Data Center at Qualcomm, said in a statement that its “new AI infrastructure solutions empower customers to deploy generative AI at unprecedented TCO (total cost of ownership ), while maintaining the flexibility and security modern data centers demand.”

AI200 is expected to be commercially available in 2026, while AI250 will be launched commercially in 2027.

As for its partnership with HUMAIN, Qualcomm said that it is “creating a blueprint for how nations can build complete AI capabilities, from data center operations to commercial AI services.”

“By establishing advanced AI data centers powered by Qualcomm's industry-leading inference solutions, we are helping the Kingdom create a technology ecosystem that will accelerate its AI ambitions of becoming a hub of intelligent computing,” said Cristiano Amon, president and CEO at Qualcomm.

AMD entered into a $10-billion partnership with HUMAIN in May to deploy 500 megawatts of AI compute capacity over the next five years.

Qualcomm still needs to prove it ‘has a seat at the table’

Wolfe Research analysts, led by Chris Caso, reiterated their Peerperform rating for Qualcomm on Monday, without disclosing a price target.

Caso said that estimating the value of Qualcomm's deal with HUMAIN was difficult because there was a lack of details about power consumption, product performance and pricing. But he noted that $1 billion was “a reasonable guess.”

However, because the first customer for AI200 and AI250 “is a sovereign customer rather than an established cloud provider,” it would likely mean that investors will “view this as a less compelling endorsement of QCOM’s technology,” Caso wrote in his client note.

“Nonetheless, QCOM does have a customer, they do now have a product and they are likely to have some revenue,” he added. “To prove that QCOM indeed has a seat at the table however, more details will be required with regard to performance, QCOM's roadmap, and the potential for customers beyond HUMAIN."

Rosenblatt analysts, led by Kevin Cassidy, were a little more bullish on the deal with HUMAIN, calling it a “positive for QCOM shares for the longer-term.”

The firm reiterated its Buy rating and maintained a $225 price target.

“For years management’s strategy has been to diversify its end markets while growing its smartphone market share,” Caso said. “Landing a 200MW deployment with HUMAIN is a very good step in a new growth vector for AI inference data centers.”

Caso estimates that Qualcomm’s deal with HUMAIN could be about $2 billion.

Qualcomm’s stock jumped 11.1% on Monday.