After-hours surged by more than 16%! Qualcomm (QCOM.US) Investor Day unveils "Data Center Grand Plan": Revenue targets $15 billion in 2029, doubling non-mobile business goals.

On Wednesday local time, Qualcomm released extremely aggressive growth signals at its New York investor day, announcing a major push into the artificial intelligence (AI) data center chip field and significantly raising its long-term financial targets. Boosted by this news, Qualcomm's stock price surged in after-hours trading. Qualcomm expects that by the fiscal year 2029, its data center business annual revenue will exceed $15 billion, while overall revenue from businesses outside of smartphones will reach $40 billion. This non-smartphone business target is almost double the $22 billion set two years ago. The company also expects that by then, revenue from smartphone chips will only account for one-third of its total chip business revenue. Chief Financial Officer Akash Palkhiwala said, "We will achieve true diversification." Specifically, the growth path of the data center business is clear and aggressive. Palkhiwala revealed that starting in the fiscal year 2027, which began this October, this business will contribute $5 billion in revenue, with $1 billion coming from new expanded custom chip customers. By the further out fiscal year 2029, the revenue target for the company's automotive chip business has also been raised to $10 billion, with the "automotive design win pipeline" expanding to $65 billion. Qualcomm also expects adjusted earnings per share to exceed $18 in the fiscal year 2029, well above analysts' expectations of $15.26. Meta and Microsoft Corporation are among the two "mega-scale customers" for custom chips To achieve this goal, Qualcomm announced a series of heavyweight products and partnerships, formally competing head-on with giants like NVIDIA Corporation and Broadcom Inc. in the data center field. Qualcomm introduced the central processor "Dragonfly C1000" designed for AI data centers, and announced that Meta Platforms has agreed to adopt this chip in its infrastructure. The CPU will go into mass production in 2028, and Meta will also use subsequent iterations of the product. Qualcomm emphasized that this processor is specifically designed for "intelligent AI," focusing on providing high-performance computing power with lower power consumption. At the same time, Microsoft Corporation has become a customer for its new category of AI chips. The chip uses Qualcomm's "High Bandwidth Compute" (HBC) technology path, utilizing cheap memory chips commonly used in smartphones and laptops, replacing the high-cost high-bandwidth memory used by NVIDIA Corporation and the SRAM memory used by Cerebras. Qualcomm's data center business leader Tony Piallis said, "This brings enormous value to the industry, achieving high performance at a high cost advantage." In addition to the aforementioned public giants, Qualcomm also revealed that it has won custom chip contracts with another two unnamed "mega-scale" cloud service providers, with related revenue set to begin generating by the end of this year. Piallis described this process as "customers pulling us in, rather than us pushing in." "Experience with smartphone power consumption" serves as the key to the data center market Qualcomm CEO Cristiano Amon believes that the company's entry into the data center market is not late. He said that the use of AI is shifting toward "intelligent agents" that can handle specific tasks, creating opportunities for Qualcomm's technology. He specifically mentioned that Chinese users have shown a more natural way of human-computer interaction, using voice to execute multi-stage tasks such as rearranging meetings on their phones. Amon believes that Qualcomm's expertise in power consumption control in the smartphone chip field will be a weapon for its success in the AI data center market. Because in newly built AI data centers, available power is becoming a bottleneck. He also pointed out that AI computing extending to devices such as cars and Siasun Robot & Automation will create more opportunities. Regarding the Chinese market, Amon expressed optimism, stating that Qualcomm will launch a data center chip version that does not violate US export control rules. Challenging NVIDIA Corporation, a new variable in a crowded race track To better compete with NVIDIA Corporation's CUDA ecosystem, Qualcomm also announced that it has reached an agreement to acquire AI software startup Modular Inc. for approximately $3.9 billion in stocks on the same day. The software developed by this company allows AI applications to run on various chip architectures, seen as filling the software capability gap required for Qualcomm to enter the data center. The measures announced by Qualcomm at the investor day mark the company's full turn towards a broader market as it faces pressure from the smartphone market reaching its peak growth, with major customers Apple Inc. and Samsung developing their own chips. However, strong competitors already surround the company on this path. Bank of America analysts have warned in a previous report that Qualcomm is entering a rapidly expanding but extremely crowded market, not only facing NVIDIA Corporation's absolute advantage but also dealing with new players like Cerebras and competition from cloud giants like Amazon.com, Inc.'s Graviton and Alphabet Inc. Class C's Axion. Despite this, the market has responded positively to Qualcomm's ambitious plans. During regular trading hours on Wednesday, Qualcomm's stock closed at $197.41, up 16% year-to-date. With the optimistic outlook released in after-hours, the stock price soared again, with a peak increase of over 16%. Even Arm, which provides underlying technology for many of Qualcomm's chips, saw its stock rise by 8%. CHINAHONGQIAO's valuation has returned to below its historical average, with institutions optimistic about the stabilization of aluminum prices and share buyback catalysts.