SAN DIEGO, California: Qualcomm has struck a long-term partnership with Amazon that could see the cloud giant buy up to US$60 billion of its AI data-center chips and related products, strengthening the chipmaker's push to become a major supplier of AI infrastructure.

The agreement also gives Amazon warrants worth about $4 billion that vest with product purchases and allow it to buy Qualcomm shares at a fixed price of $161.26 each, according to a regulatory filing.

Qualcomm shares rose more than four percent following the announcement.

The agreement comes as Qualcomm works to diversify beyond smartphones amid the eventual loss of its Apple modem business, rising component costs and weaker handset demand.

Over the past year, Qualcomm has been courting cloud providers with custom AI chips and data-center technology as those companies look for alternatives to Nvidia's dominant processors.

Amazon joins Microsoft and Meta among customers supporting that effort. Qualcomm expects its data-center chip business to generate $15 billion in revenue by 2029.

"The deal is exactly the kind of development that Qualcomm needed to reassure the market that the lofty data-center ambitions they set for themselves could ‌indeed ⁠be met," said Bob O'Donnell, chief analyst at TECHnalysis Research.

The partnership follows a similar agreement reached weeks earlier between Marvell Technology and Alphabet's Google involving custom AI chips. That deal gave Google the right to buy a stake in Marvell worth up to $12.2 billion.

Under the Qualcomm-Amazon agreement, the companies will collaborate on chips used for AI inference, a market focused on running trained AI models that has become a key area of competition among semiconductor companies.

Amazon's custom chip business has been expanding rapidly this year and has become a growth driver for its cloud business. It reached an annualized revenue run rate of more than $25 billion at the end of the June quarter.

Qualcomm and Amazon will also develop high-speed optical connectivity technologies to meet growing bandwidth requirements in AI data centers, including solutions extending to 1.6 terabits per second.

"By incorporating both compute and optical interconnect, Qualcomm is highlighting ⁠the range of semiconductor technologies that they can uniquely bring to AI infrastructure," O'Donnell said.

As part of the partnership, Qualcomm also plans to increase its use of Amazon Web Services and infrastructure for chip-design workloads, with the aim of shortening development cycles.