Global chip supplier Qualcomm Inc. (NASDAQ: QCOM) is reportedly in talks with China's ByteDance to provide custom chip-design services.
If the deal materializes, the TikTok parent would become an early customer of Qualcomm's chip-design services operation, Reuters reported on Wednesday.
The proposed chips for ByteDance would partially utilize technology from AlphaWave Semi, a high-speed connectivity company acquired by Qualcomm last year. However, talks are still ongoing, and ByteDance may ultimately pursue alternative partners, according to the report.
The discussions also reportedly involve the design of video processing units (VPUs), with the aim of starting mass production by the end of the year.
Qualcomm and ByteDance did not immediately respond to Benzinga's request for comments.
AI Deals Drive Qualcomm's Next Phase
The report comes as Qualcomm is expanding into the fast-growing data center chip market, developing CPUs, AI inference accelerators, and custom ASICs for customers, positioning itself against rivals such as Broadcom Inc. (NASDAQ: AVGO) and Marvell Technology Inc. (NASDAQ: MRVL).
The company has been in talks to acquire AI chip startup Tenstorrent to expand its AI chipmaking capacity and is also reportedly eyeing a $4 billion deal for AI company Modular Inc.
The reported ByteDance talks come at a critical time for Qualcomm, which is grappling with higher memory-chip costs and a slowdown in smartphone demand, as global handset shipments are projected to post a record annual decline this year.
The talks also coincide with Qualcomm CEO Cristiano Amon's push into AI hardware, as he revealed the company is developing over 40 AI-powered devices, including smart jewelry, AI-enabled earbuds, pins, and watches designed to act as personal AI assistants.
China Push Continues Despite Tensions
Notably, talks also highlight that U.S. technology companies remain eager to pursue business opportunities in China despite growing U.S.-China tensions over AI chip exports.
However, earlier this month, ByteDance was reported to be doubling down on domestic companies, being in talks with China's Iluvatar CoreX and Baidu Inc. (NASDAQ: BIDU) to acquire AI chips, potentially making Iluvatar CoreX ByteDance's third major domestic GPU supplier.
Benzinga edge rankings indicate QCOM has a Momentum score in the 86th percentile and Growth score in the 43rd percentile.
Price Action: On a year-to-date basis, shares of QCOM surged 18.01%, as per Benzinga Pro data. On Monday, the stock declined 8.01% to close at $204.13.