Qualcomm announces new AI chips in data center push, shares surge

By Harshita Mary Varghese

Oct 27 (Reuters) - Qualcomm QCOM.O on Monday unveiled two artificial intelligence chips for data centers that will be available next year, diversifying beyond a stagnant smartphones market and sending its shares up 20%.

The share gain following the news underscores strong enthusiasm for the company's AI bets while the smartphone chipmaker geared up to compete against Nvidia's NVDA.O AI data center heft.

The new chips, called AI200 and AI250, are designed for improved memory capacity and running AI applications, or inference, and will be commercially available in 2026 and 2027, respectively.

Global investment in AI chips has soared as cloud providers, chipmakers and enterprises rush to build infrastructure capable of supporting complex, large language models, chatbots and other generative AI tools.

Qualcomm said the new chips support common AI frameworks and tools and played up cost-savings for enterprises. The company also unveiled racks based on the new chips, as Nvidia and AMD AMD.O move from selling chips to providing larger data center systems.

Though competition against Nvidia has been heating up, the high costs of switching chip providers and superior performance of Nvidia processors has made it difficult for new entrants to gain traction.

Qualcomm said Humain, an AI startup launched by Saudi Arabia's sovereign wealth fund, will deploy 200 megawatts of its new AI racks starting in 2026.

"Qualcomm's entry and major deal in Saudi Arabia prove the ecosystem is fragmenting because no single company can meet the global, decentralized need for high-efficiency AI compute," said Joe Tigay, portfolio manager of the Rational Equity Armor Fund.

QUALCOMM DIVERSIFIES

Qualcomm is the world's largest supplier of modem chips that enable smartphones to connect to wireless data networks.

But it has been diversifying its business to reduce dependence on the smartphone market, which makes up a majority of its sales after losing Huawei HWT.UL as a major customer and client Apple's AAPL.O efforts to develop in-house chips.

Over the last two years, it has entered the personal computer market, competing against Intel INTC.O and AMD to sell chips that power Windows-based laptops.