Qualcomm Targets Data Center Revenue Growth Amid AI Expansion

Qualcomm (NASDAQ: QCOM) is shifting its strategic focus toward artificial intelligence infrastructure, aiming to counter its recent underperformance relative to peers like Nvidia and AMD. While the semiconductor sector index has gained 232% over the last three years, Qualcomm’s stock has risen only 63%, a lag attributed to its historical dependence on the saturated smartphone market. According to reports from GN stocks/chips, the company is now addressing this gap by expanding its portfolio of server central processing units and AI accelerators designed for data center workloads.

The company’s pivot is evidenced by recent commercial agreements with major technology firms. In June, Qualcomm secured 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 chips. Additionally, Qualcomm announced a partnership with Amazon to co-develop multiple generations of custom AI chips and optical connectivity components. These collaborations mark a significant step in diversifying Qualcomm’s revenue streams away from mobile devices and into the high-growth inference and agentic AI sectors.

Data Center Revenue Projections

Qualcomm’s management expects the data center segment to become a primary driver of future growth. The company estimates that revenue from this sector will reach $5 billion in fiscal 2027 and scale to $15 billion by fiscal 2029. This expansion is intended to offset broader industry headwinds, as consensus estimates currently project a 3% decline in Qualcomm’s total revenue to $43 billion in fiscal 2026. The anticipated acceleration in data center sales is expected to reverse this trend in subsequent fiscal years, provided the company continues to secure additional hyperscaler clients.

Valuation and Earnings Outlook

Despite its slower stock price appreciation, Qualcomm trades at a discount to its competitors, with a forward earnings multiple of under 17 times. This valuation is notably lower than the Nasdaq-100 index, which currently trades at 34 times earnings. Analysts suggest that if Qualcomm’s earnings-per-share growth approaches the projected 25% rate in fiscal 2028, the market may re-rate the stock. A potential re-rating to 30 times earnings would align with a higher growth trajectory, indicating that the current price may not fully reflect the company’s expanding role in the AI semiconductor market.

Competitive Positioning Against Peers

Nvidia, AMD, and Broadcom have each recorded gains exceeding 300% over the past three years, driven by aggressive investments in AI data center infrastructure. Qualcomm’s strategy differentiates itself by focusing on custom silicon and rack-scale systems for specific hyperscaler needs rather than general-purpose GPUs. If Qualcomm successfully executes its roadmap and adds more AI companies to its client list, its growth rate could outpace these established leaders. The company’s ability to translate partnerships with Meta and Amazon into sustained revenue growth will be the key determinant of its future market performance.