Qualcomm joins the AI ​​race: Is QCOM a must-have stock?

Qualcomm (QCOM) is entering the field of artificial intelligence (AI), a space dominated by Nvidia (NVDA) and Advanced Micro Devices (AMD). Qualcomm, long known as a dominant player in smartphone chips, launched two new AI-focused accelerators aimed at the data center market.

The company’s announcement of its AI200 and AI250 accelerators sent its shares soaring 11.1% on October 27, reflecting renewed investor confidence that Qualcomm may be poised for a new phase of growth beyond mobile.

For years, Qualcomm’s fortunes have been closely tied to the smartphone industry. The company’s diversification into automotive, IoT and now data centers is a strategic attempt to reduce dependence on mobile revenue, especially after losing Huawei as a major customer.

The Qualcomm AI200 and AI250 are designed to offer high performance per dollar and per watt, which could drive adoption. Additionally, the timing of Qualcomm’s expansion into AI chips couldn’t be better. Investments in the sector are growing rapidly, with cloud giants rushing to build systems capable of handling chatbots and massive generative AI models. Qualcomm’s upcoming chips, scheduled for commercial availability in 2026 and 2027, are designed to capture AI-driven demand.

But breaking into the AI ​​data center market won’t be easy. Nvidia dominates the space, and AMD is slowly gaining share with its next-generation AI accelerators. Additionally, the cost of switching AI platforms makes it difficult for new players to gain share quickly. However, Qualcomm’s rack-based solutions, equipped with direct liquid cooling features, focused on energy efficiency and cost-effective performance, provide a strong competitive advantage.

Encouragingly, Qualcomm is already in talks with major potential customers, including a leading hyperscaler, suggesting early traction in a market that often takes years to penetrate. If these commitments are converted into design achievements, management expects significant revenue contributions to the AI ​​data center business to begin around fiscal 2028.

Qualcomm’s ambition in the AI ​​data center space is supported by the pending acquisition of Alphawave IP Group, a specialist in high-speed connectivity and computing technologies. The deal, expected to close in early 2026, will enhance Qualcomm’s data center design capabilities and complement its core processor technologies. This acquisition, combined with its internal development of NPU-based accelerators and AI-focused SoCs, strengthens its vertical integration strategy.

In addition to its global presence, Qualcomm also signed a memorandum of understanding with HUMAIN to develop AI data centers in Saudi Arabia. The partnership targets an initial capacity of 200 megawatts using Qualcomm’s AI200 and AI250 racks by 2026, offering a significant growth opportunity.

While the data center business could become a major new revenue stream, the company is poised to capitalize on the future of AI on personal and physical devices. Smart glasses, wearables and even robotics are emerging as major growth opportunities for Qualcomm’s high-efficiency, low-power chips.

With its Snapdragon platform delivering 5G connectivity, low-power processing and on-device AI capabilities, Qualcomm is uniquely equipped to capitalize on demand stemming from a new generation of consumer devices.

While Wall Street currently maintains a “Moderate Buy” rating for Qualcomm, the market may be underestimating the long-term potential of its transformation. The company’s automotive and IoT segments are already showing steady momentum, while its new AI initiatives promise to open a new multi-year growth runway. With automotive partnerships like BMW’s upcoming ADAS launch and a recently strengthened alliance with Xiaomi (XIACY), Qualcomm is laying the foundation for diversified and resilient revenue streams.

In short, Qualcomm’s story is evolving from a smartphone chip maker to a comprehensive leader in artificial intelligence technology. The transition will not happen overnight, but the strategy looks attractive and the timing is favorable. As AI reshapes the computing world, Qualcomm’s entry into the race could accelerate its growth, making it a buy for long-term investors.

On the date of publication, Amit Singh had no (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article are for informational purposes only. This article was originally published on Barchart.com