Qualcomm Shares Jump 16% on AI Data Center Push and China Outlook

Qualcomm shares surged as much as 16% in after-hours trading after CEO Cristiano Amon revealed new momentum in the company’s AI strategy, including plans to ship data center chips to a major hyperscaler customer later this year.

From Decline to Rally

The stock initially dropped up to 7% despite second-quarter earnings beating Wall Street expectations, as investors focused on weaker-than-expected third-quarter guidance. However, sentiment quickly reversed following Amon’s comments about upcoming AI-related business.

Amon did not disclose the identity of the hyperscaler but said more details would be shared at Qualcomm’s investor day in June.

Entering the AI Data Center Race

While Qualcomm has historically lagged behind rivals like Nvidia in AI infrastructure, the company is now making a strategic push into the data center chip market. It first unveiled its data center ambitions last year and is positioning itself to benefit from the rapid rise of AI workloads.

Amon emphasized that the shift toward AI agents is reshaping Qualcomm’s long-term strategy:

“We are in a period of profound industry transformation — the rise of AI agents is reshaping our roadmap across every platform we develop.”

The company is also collaborating with OpenAI to develop AI-powered smartphone chips, potentially for a future AI-centric device.

China Demand Bottoming Out

Another key catalyst for investor optimism was Amon’s outlook on China, a critical market for Qualcomm. He said the current quarter is likely the low point for China sales, as customers are running down existing inventory.

This suggests a potential rebound in demand in the coming quarters.

Earnings Snapshot

• Adjusted EPS: $2.65 (above expectations)
• Revenue: $10.6 billion (in line with estimates)
• Q3 Revenue Forecast: $9.2 billion–$10 billion (below expectations)

Despite the softer outlook, investors appeared more focused on Qualcomm’s future growth drivers.

Broader Market Pressures

Qualcomm’s core markets—smartphones and PCs—are facing headwinds due to rising memory prices and slowing demand. Industry forecasts suggest:

• PC prices could rise 17%, with shipments declining over 10%
• Global smartphone shipments are down more than 4%

The company has also lost a key customer, Apple, which began replacing Qualcomm modems with in-house chips in iPhones starting in 2025.

Growth in New Segments

Qualcomm is diversifying beyond smartphones:

• Automotive segment: Up 38% year over year, driven by demand for chips powering advanced driver-assistance systems
• AI partnerships: Expanding relationships with major AI firms beyond OpenAI

Amon noted that while Qualcomm’s scale in data center chips is still smaller than established players, its pipeline of design engagements is strong.

Bottom Line

Qualcomm’s sharp stock rebound reflects growing investor confidence in its AI pivot and future growth opportunities, even as its traditional markets face pressure. The combination of hyperscaler demand, improving China outlook, and expanding AI partnerships positions the company for a potential turnaround in the evolving semiconductor landscape.