Qualcomm Targets Data Center Growth Amid Peer Valuation Gaps

Qualcomm is positioning its semiconductor portfolio for a structural shift away from consumer mobile devices toward data center infrastructure. While Nvidia, AMD, and Broadcom have delivered over 300% returns in three years, Qualcomm shares have gained only 63%, lagging the PHLX Semiconductor Sector index’s 232% appreciation. This divergence stems from Qualcomm’s historical reliance on the saturated smartphone market, which has constrained top-line and bottom-line expansion despite the broader AI hardware boom.

The company is now competing directly with these established leaders by designing server CPUs, AI accelerators, and rack-scale systems. According to reporting from GN stocks/chips, Qualcomm is targeting the growing demand for agentic AI and inference workloads. This strategic pivot aims to replace mobile-centric growth with recurring revenue from hyperscaler deployments, fundamentally altering the company’s growth profile and margin structure.

Hyperscaler Partnerships Drive Data Center Revenue

Qualcomm has secured two significant commercial agreements that validate its entry into the AI server market. In June, the company announced a deal with Meta Platforms to supply its Dragonfly data center CPUs for next-generation AI servers, with Meta committed to deploying future generations of these processors. Additionally, Qualcomm entered a partnership with Amazon to develop multiple generations of custom AI chips and optical connectivity components.

These contracts are expected to accelerate the data center segment’s contribution to total revenue. The company projects data center revenue will reach $5 billion in fiscal 2027, scaling to $15 billion by fiscal 2029. This expansion is critical because consensus estimates currently show total corporate revenue declining by 3% to $43 billion in fiscal 2026. The data center segment is thus projected to become the primary engine for reversing this near-term revenue contraction.

Valuation Discount Reflects Mobile Sector Constraints

Qualcomm currently trades at under 17 times forward earnings, a multiple significantly lower than its direct competitors in the AI semiconductor space. This discount reflects investor skepticism regarding the company’s ability to displace entrenched rivals in the data center market. However, the firm’s earnings-per-share growth rate is forecast to approach 25% by fiscal 2028, driven by the mix shift toward higher-margin server products.

If the market re-rates Qualcomm’s stock to reflect its improved growth trajectory, a multiple of 30 times earnings is considered plausible. This hypothetical multiple remains a discount to the Nasdaq-100 index’s 34 times earnings multiple. Such a re-rating would imply a potential stock price of $390, representing a 124% increase from current levels. This scenario relies entirely on the successful execution of the Amazon and Meta partnerships and the timely delivery of the Dragonfly CPU architecture.

Fiscal 2029 Revenue Targets Depend on Execution

The projected jump to $15 billion in data center revenue by fiscal 2029 assumes Qualcomm can secure additional hyperscaler clients beyond Meta and Amazon. The company’s competitive advantage lies in its existing relationships and its ability to offer integrated rack-scale solutions. However, the execution risk remains high, as the data center market is dominated by Nvidia and AMD, which have established supply chains and software ecosystems.

Investors are monitoring Qualcomm’s quarterly disclosures for specific updates on the timeline of the custom Amazon chips and the volume of Dragonfly CPUs shipped to Meta. Any delays or technical issues in these deployments would directly impact the fiscal 2027 revenue target of $5 billion. The stock’s future performance is therefore tied not to general AI trends, but to the specific commercial success of these two flagship partnerships.