As Qualcomm competes with Nvidia and AMD in the AI chip race, its stock rises by more than 20%.

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Introduction

With the announcement that Qualcomm (QCOM) is entering the data center market with the introduction of its new AI200 and AI250 chips and rack-scale server capabilities, the company's stock shot up more than 20% on Monday.

In an attempt to establish its claim to a share of the multibillion-dollar data center business, Qualcomm is now directly competing with companies like Nvidia (NVDA) and AMD (AMD).

The AI200 is the name of both Qualcomm's standalone AI accelerator and the entire server rack that it fits into, replete with a Qualcomm CPU. It will be available starting in 2026. Qualcomm's next-generation AI server and accelerator, the AI250, will launch in 2027. In 2028, a third server and chip are planned.

Qualcomm claims that going forward, it will adhere to this yearly schedule.

The company claimed that its unique Hexagon NPU, or neural processing unit, is used in its AI200 and AI250 CPUs. The company has incorporated NPUs into its Windows PC chips and is scaling them up for data centers using the lessons learned from those processors.

Because of their low power usage, Qualcomm is also highlighting the servers' total cost of ownership as a major advantage. According to the business, the chips are made especially for AI inference, which is the process of executing AI models. Customers won't use them to train new AI models, to put it another way.

As data center builders attempt to control the overwhelming expenses of building and operating their massive server farms, total cost of ownership has emerged as a key indicator.

According to Qualcomm, the primary distinction between the AI200 and AI250 is that the AI250 will provide ten times the memory bandwidth of the AI200.

To access Qualcomm's chips, customers won't necessarily need to buy the company's servers. They will have the option to select specific chips, parts of the company's server capabilities, or the complete infrastructure, according to Durga Malladi, senior vice president and general manager for technology planning, edge solutions, and data centers at Qualcomm.

According to Malladi, those clients might include businesses like AMD and Nvidia, making them both competitors and possible allies.

Qualcomm has previously entered the data center business. 

The business declared in 2017 that it was working with Microsoft (MSFT) to develop the Qualcomm Centriq 2400 platform, but the project soon collapsed due to fierce competition from AMD and Intel as well as more general corporate problems, such as a number of litigation that diverted the company's attention.

Currently, Qualcomm also sells its own AI 100 Ultra card, although it is intended to be used as a drop-in card for servers that are already on the market. Dedicated AI systems are intended to house the AI200 and AI250.

As part of a larger initiative to wean itself off of its strong reliance on smartphone processors and licensing money, the business is pushing into the data center industry.

Qualcomm announced $10.4 billion in overall revenue for the third quarter. $6.3 billion of that came from its phone division. Data center income is not disclosed by Qualcomm.

Conclusion

However, if it starts to gain traction in the market, that might change. However, Qualcomm will need to put in a lot of work to have a significant impact because cloud giants like Amazon (AMZN), Google (GOOG, GOOGL), Microsoft, and Nvidia and AMD currently dominate the market and use or create their own AI chips.

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