Qualcomm expects its data center business to generate billions of dollars in revenue during the fiscal year beginning in October as the company gains momentum in the rapidly expanding market for artificial intelligence infrastructure.

The chipmaker also announced that Meta Platforms will use its new Dragonfly C1000 processor and future generations of the product across its data centers.

The C1000 is expected to become available in 2028.

The Meta agreement gives Qualcomm a major customer for its data center push as the company works to reduce its dependence on smartphone chips.

Qualcomm is the largest supplier of processors and connectivity chips for Android smartphones, but growth in that market has slowed as major customers increasingly develop more components internally.

The company is now applying its experience designing power efficient mobile chips to data centers, where access to electricity has become one of the largest constraints on AI expansion.

Qualcomm argues that its chips can deliver stronger performance per watt, reducing the energy and operating costs associated with training and running artificial intelligence models.

The company unveiled several data center products at its investor event, including the new AI300 accelerator.

The AI300 will join the previously announced AI200 and AI250 chips, which are designed primarily for running trained AI models.

The accelerators will work alongside Qualcomm’s networking products, general purpose processors and custom chips developed for large cloud and technology companies.

Qualcomm is entering a highly competitive market dominated by Nvidia and other established semiconductor companies including Broadcom and Intel.

Major data center operators such as Google and Amazon also design their own processors, creating demand for companies that can help turn custom chip designs into finished products.

The company said its data center expansion will begin producing meaningful revenue during fiscal 2027, with management expecting the business to generate billions of dollars during the year.

Qualcomm also announced an agreement to acquire artificial intelligence software company Modular in an all stock transaction valued at approximately $3.92 billion.

Modular develops software that allows artificial intelligence models to operate across different types of chips without developers rewriting code for each hardware platform.

The acquisition strengthens Qualcomm’s effort to compete with Nvidia’s CUDA software ecosystem, which has helped keep developers and customers tied to Nvidia hardware.

Qualcomm shares fell about 5% on Wednesday and traded near $194 despite the Meta agreement and data center revenue outlook.