QCOM is a high-conviction buy; Amazon deal confirms data center potential and supports 58% upside to $277 in 12-18 months.

On Tuesday, September 8th, Qualcomm and Amazon announced a deal that could be worth billions of dollars. So, that's now two deals for the data center market for Qualcomm, which as of yet has yet to produce anything or generate any revenue from this category.

And this could be huge for Qualcomm stock investors. Let me share with you the details, what it means for Qualcomm, and whether or not this stock is still a buying opportunity.

So, Qualcomm, if you didn't already know, is the largest maker of smartphone processors.

It generates about half of its overall revenue from the smartphone market. And of course, the smartphone market is facing considerable headwinds in 2026 as a result of higher memory and storage prices, which resulted from supply and demand dynamics from the data center industry.

So, Qualcomm is already suffering from the booming demand in the data center. It wasn't actually benefiting from the booming demand in the data center. It was one of the few semiconductor companies that was not participating in the rally.

But these latest developments and Qualcomm's entry and potential entry into the data center with new products is finally allowing Qualcomm to benefit from booming demand.

So, it signed up Amazon as a data center chip customer in a deal that will span multiple generations and gives Amazon the right to acquire as much as $4 billion of Qualcomm stock.

So, this is huge. Amazon is already agreeing to multiple generations of Qualcomm chips without even purchasing one generation of their chips.

This is the confidence that Qualcomm has earned in the marketplace. Qualcomm has a strong reputation for building great products and expanding into new categories. Qualcomm recently expanded into the PC and laptop category with a new product, a new processor that goes into those products, and it's achieving great success there.

And then prior to that, it expanded into the automotive industry, where again it delivered a great product that's gaining significant traction. So, its entry into the data center would be the third new market outside of smartphones that the company's entering into, and I can understand companies like Amazon and Meta giving the company reasonable doubt that they can achieve the success in this category because of their historical performance in other categories.

So, this tie-up will create customized silicon to support Amazon Web Services AI infrastructure. Under the terms of the transaction, Qualcomm issued Amazon with a warrant to acquire as many as 25 million shares at an exercise price of $161 a piece.

The warrant will vest in tranches connected to orders for chips by Amazon up to a value of $60 billion.

Shares of Qualcomm jumped about 10% before markets opened yesterday as a result of this agreement. So, this was a big agreement, right? It wasn't just for one set of a company's product or one generation purchase.

This was a multi-year agreement before Qualcomm even has a product ready.

So, sales of the products that were agreed on in this deal probably won't go into transaction until 2027 at the earliest, but probably 2028. Qualcomm is just now delivering or creating this product, so it only has prototypes that Amazon and Meta Platforms have been able to test and consider how they'll work within their systems, and that was enough to convince Amazon and Meta Platforms to agree to deals with Qualcomm.

And to me, this makes it even more appealing for Qualcomm investors because Amazon has its own proprietary chips outside of Nvidia and AMD.

And so, for Amazon to agree to Qualcomm's chips when they have their own chips, is a testament to how confident they are in Qualcomm's product development capabilities. So, this was really great news for Qualcomm stock investors.

So, I've been ranking Qualcomm stock as a buying opportunity all year long. In fact, for a brief moment, I had Qualcomm stock ranked as one of the best stocks you can buy, and then when the share price soared earlier this year, I downgraded it off my top stocks to buy list.

I still had it ranked as a buy, but just not one of the top stocks to buy.

And even today, if you look at my fair value estimate of $277 compared to the current market price of $175, I see a significant upside here for Qualcomm's stock of about 58% over the next 12 to 18 months.

So, even after this deal, even after the stock price increase following this announcement, I'm more bullish on Qualcomm's stock than I was before the announcement. As I mentioned, I already had Qualcomm's stock ranked as a buying opportunity with a high conviction level.

I've I've been pretty confident about Qualcomm's stock, and I last updated it on August 31st. Today, I will update that buy ranking with a high conviction rate ranking for Qualcomm's stock after this huge announcement with Amazon.