Qualcomm plans AI server chips for 2028 amid competitive challenges

Qualcomm has announced plans to develop server CPUs and full rack systems for AI inferencing clusters in hyperscale data centers, marking a significant expansion beyond its mobile chip dominance. The company is currently in “advanced discussions” with a leading hyperscaler about custom silicon, though revenue from this initiative won’t begin until fiscal 2028—potentially giving competitors a substantial head start.

What you should know: Qualcomm is positioning itself to capitalize on the shift toward ARM-based processors in cloud computing as AI workloads demand better efficiency metrics.

• CEO Cristiano Amon explained the company is developing “a general purpose CPU” specifically aimed at hyperscale customers, along with accelerator cards and complete server racks.
• The timing reflects broader industry movement away from x86 CPUs (traditional processors used in most computers) toward custom ARM-based alternatives, driven by cloud providers’ focus on “tokens per watt and tokens per dollar” rather than pure performance.
• Qualcomm expects to begin generating revenue from this expansion around fiscal 2028, assuming successful negotiations with potential customers.

The competitive challenge: The delayed timeline could leave Qualcomm trailing established players who have been building AI infrastructure for years.

• Broadcom’s custom accelerator business is already scaling aggressively, giving it a significant advantage in the hyperscale market.
• The crowded data center market includes entrenched rivals with years of experience serving cloud service providers’ specific needs.
• Qualcomm’s track record in adjacent markets remains mixed—its PC business has captured only nine percent of the premium Windows laptop market despite recent efforts.

Market reaction: Investor enthusiasm for the data center expansion was notably absent, with Qualcomm’s stock price dipping following the earnings announcement.

• The muted response suggests skepticism about Qualcomm’s ability to execute successfully in a highly competitive market.
• Pressure is mounting from Qualcomm’s core mobile business, where Samsung is preparing to launch advanced system-on-chips (SoCs) for flagship devices by 2026.
• This diversification effort appears driven by necessity rather than strength, as competition intensifies in Qualcomm’s traditional stronghold.

Why this matters: Qualcomm’s data center ambitions represent a critical test of whether the company can successfully expand beyond mobile chips into the rapidly growing AI infrastructure market.

• Success would provide crucial revenue diversification as the smartphone market matures and competition intensifies.
• However, the three-year timeline to revenue generation raises questions about whether Qualcomm can catch up to competitors who have been investing in this space for years.
• The outcome will likely determine whether Qualcomm can maintain its position as a major semiconductor player or risk being relegated to a niche mobile-focused role.