Arm Aims to Capture 50% of Data Center CPU Market by End of 2025, Driven by AI Boom

Arm aims to capture 50% of data center CPU market in 2025

Arm Holdings hopes to increase its share of the global data center CPU market from 15% to 50% by the end of 2025. Mohamed Awad, senior vice president of infrastructure at Arm, made the claim in an interview with Reuters. The company pins its hopes primarily on AI servers, so consider offerings like Nvidia's GB200 and GB300 machines, custom silicon from large cloud service providers, and Ampere Computing-based systems. Most servers today run AMD's EPYC processors or Intel's Xeon CPUs that rely on the x86 instruction set architecture, as there is more data center-grade software for x86. However, the situation is changing, and Arm says that some server programs are now developed for Arm-based processors first and then ported to x86. Google and Microsoft have also started designing data center processors with Arm's technology, although their projects are at an earlier stage compared to Amazon. While x86 dominates the server market and will likely continue for a while, Arm adoption is growing. Arm is used by Amazon Web Services for its Graviton CPUs, which are used for many of its instances instead of AMD's or Intel's processors. Half of the processors used by AWS are indeed Arm-based Graviton CPUs. In addition, Ampere Computing offers Arm-based CPUs for data centers. Ampere is a chip designer backed initially by Oracle but now owned by SoftBank (which also happens to own Arm Holdings). In addition to AWS and Ampere, Nvidia is emerging as a major backer of Arm in the datacenter space. The company's Grace CPUs with 144 Arm Neoverse V2 cores power GB200 and GB300 AI servers will likely become popular with large cloud service providers. But Arm pins its hopes not only on AWS, Ampere, and Nvidia. The company also offers compute subsystems (CSS) based on its Neoverse cores, enabling chipmakers to build their data center-grade CPUs relatively easily. Furthermore, Arm is reportedly developing its own CPUs for large cloud service providers, such as Meta. These CPUs have yet to gain market share, though if Meta deploys them in volume, they will inevitably control a significant part of the server CPU market as Meta is one of the major users of servers globally.

Arm targets 50 percent of datacenter CPUs this year

Arm expects to see its architecture account for half of the datacenter CPU market by the end of this year, up from 15 percent in 2024, all thanks to the AI boom. The Brit chip designer has long touted the AI credentials of chips based on its architecture and is gradually gaining ground in the server market, but Arm's infrastructure chief, Mohamed Awad, now claims that he expects its share of the global market for datacenter processors to surge to 50 percent by the end of the year. In an interview with Reuters, Awad claimed that Arm's technology typically offers lower power consumption than processors made by rivals such as Intel and AMD. As a result, it was argued, Arm-based products have become increasingly popular even with the big cloud computing companies, which are concerned about the power drain of their massive bit barns. But going from 15 percent last year to 50 percent by the end of this year would be a massive leap. We asked Arm to confirm if Awad did actually claim this, and how it expects to reach this figure. The Softbank-owned biz said it is largely based on the growth of AI servers. "In this unprecedented age of AI transformation we are seeing an insatiable demand for computing, with AI servers set to grow by more than 300 percent in the next few years," Awad said in a follow-up note to The Register. "For that to scale, power efficiency is no longer a competitive advantage - it is a baseline industry requirement. This is where the Arm Neoverse compute platform is the clear leader, and the compute platform of choice for industry-leading partners including AWS, Google, Microsoft, and Nvidia," he claimed. The chip designer has been seeing its architecture increasingly deployed by the big three cloud operators just mentioned. In 2023, Bernstein Research estimated that nearly 10 percent of servers across the world contain Arm application processors as their primary brains, and half of those were deployed by Amazon, which said it had more than two million of its custom Graviton chips in the cloud. Microsoft and Google were relatively late to the custom Arm processor party, with the Chocolate Factory basing its Axion chip on the designer's Neoverse V2 blueprint, while Redmond announced general availability of its own Cobalt 100 Arm CPUs in the Azure cloud later in the year. Scaling deployments by all three cloud providers could account for some of the increase that Awad is forecasting for this year, but Nvidia products are also likely to account for a significant share. The DGX GB200 NVL72 rack system comprises 36 of Nvidia's Grace CPUs and 72 Blackwell GPUs, for example, making for 2,592 Arm Neoverse V2 cores in each unit deployed, and these are likely to be in demand this year. But it is also easy to overlook other products in the datacenter that have Arm-based cores inside them, such as SmartNICs and DPUs (data processing units) such as Nvidia's BlueField-3, and also the Nitro server management cards in AWS servers. Arm's AI ambitions also extend beyond the datacenter, as chief exec Rene Haas enthused in an earnings conference call late last year. "I think when we look at what's going on with AI and when you think about AI, it's not just training in the datacenter, but it's inference in the datacenter, it's inference across different parts of the overall value chain, the network, the automobile, the PC, the mobile phone, the wearable, which can be kind of what people would call the edge," he claimed. Arm's parent SoftBank recently announced its intention to acquire Ampere, a chip firm that sells server processors based on the Arm architecture. Ampere told The Register it is expanding out from the cloud companies it initially targeted with an eye on the telecoms market. ®

Exclusive: Arm expects its share of data center CPU market sales to rocket to 50% this year

SAN FRANCISCO, March 31 (Reuters) - Arm Holdings (O9Ty.F), opens new tab expects its share of the global market for data center central processing units to surge to 50% by the end of the year, up from about 15% in 2024 with gains driven by the boom in artificial intelligence, a senior executive said. Arm's CPUs are often used as a "host" chip inside of an AI computing system and act as a kind of traffic controller for other AI chips. Nvidia (NVDA.O), opens new tab, for example, uses an Arm-based chip called Grace in some of its advanced AI systems which contain two of its Blackwell chips. Arm's tech in many cases offers lower power consumption than rival processors made by Intel (INTC.O), opens new tab and Advanced Micro Devices (AMD.O), opens new tab, Mohamed Awad, Arm's infrastructure chief, told Reuters. As AI data centers use huge amounts of electricity, Arm's chips have become increasingly popular among cloud computing companies. Awad added that data center chips often use more of Arm's intellectual property and the company typically receives "a lot higher aggregate royalty rate" than chips for less complex devices. UK-headquartered Arm, which is 90% owned by Japan's SoftBank Group (9984.T), opens new tab, does not make chips itself but sells the fundamental building blocks and other intellectual property to cloud computing companies and firms like Apple (AAPL.O), opens new tab and Nvidia to use to design chips for laptops, smartphones and data center processors. Arm generates revenue by billing companies for a license to use its tech and collects royalty payments for each chip sold. It struggled to make headway in the lucrative data center market for nearly two decades as switching over from the once-dominant x86 chips made by Intel and AMD means clients have to rewrite software as well as change up parts of hardware. "We've gotten to the point where software is actually being developed for Arm first and foremost," said Awad. Amazon.com (AMZN.O), opens new tab has designed in-house data center CPUs with Arm tech that accounted for more than half of the capacity for chips it added over the last two years, Amazon said in December. Alphabet's (GOOGL.O), opens new tab Google and Microsoft (MSFT.O), opens new tab have also made Arm-based data center chips, though their efforts are more recent than Amazon's. Reporting by Max A. Cherney; Editing by Edwina Gibbs Our Standards: The Thomson Reuters Trust Principles., opens new tab Suggested Topics:Artificial Intelligence Max A. Cherney Thomson Reuters Max A. Cherney is a correspondent for Reuters based in San Francisco, where he reports on the semiconductor industry and artificial intelligence. He joined Reuters in 2023 and has previously worked for Barron's magazine and its sister publication, MarketWatch. Cherney graduated from Trent University with a degree in history.

Arm is aiming to win half of data center CPU market by year's end

The big picture: The AI boom is significantly changing the enterprise and data center market. Arm predicts that chips based on its designs will soon amount to around 50% of CPUs used in data centers. According to Arm Senior VP Mohamed Awad, the company's market share in this sector will grow by 15 percent over 2024. Chips based on the Arm architecture used to play a marginal role in the data center business. However, things are changing fast and Arm expects substantial financial rewards thanks to the company's key partners in the market. Arm struggled to compete against the x86 enterprise leadership for nearly 20 years due to significant hardware infrastructure changes and the associated costs. Reuters notes that Arm CPUs have increased in popularity in data centers thanks to their lower power consumption levels compared to x86 chips made by Intel and AMD. Compounding the problem are the growing energy requirements of AI processing. Cloud computing providers desperately seek alternatives, and software solutions are helpful. "We've gotten to the point where software is actually being developed for Arm first and foremost," Awad said. Nvidia is another major factor in this significant market evolution, as the GPU maker heavily relies on Arm's chip architecture and IP. The Grace CPU is a custom-built solution that fully exploits the computing capabilities of the Blackwell framework. Nvidia Grace's features and benefits include better energy efficiency, ECC LPDDR5X memory for improved reliability, and a "tightly coupled" CPU and GPU system architecture. Awad explained that chips designed for data centers must achieve higher complexity and efficiency to compete since Arm's business model is primarily licensing-based. The company typically receives much greater aggregate royalty rates on higher-level designs than microchips for simpler devices and low-level consumer electronics. The data center market is one of Arm's key investments for the future. The Japanese-British chip designer had begun a substantial effort to differentiate its business, with management considering direct chip manufacturing as one solution. Arm is also in an antitrust legal battle with former business partner Qualcomm, though a victory is anything but guaranteed.

AWS, Google Cloud, Microsoft and other hyperscalers are fuelling the rise, and rise of Arm as it grabs almost 50% of total compute shipments

AWS, Google, Microsoft are leading shift from x86 to Arm infrastructure Arm says its Neoverse platform is becoming the architecture of choice for the cloud, as the likes of AWS, Google Cloud, Microsoft Azure and others drive a broader shift away from x86 in the data center. Mohamed Awad, SVP and GM of the Infrastructure Business at Arm, says power efficiency and scalability are redefining infrastructure at hyperscale. "Just over six years ago, we launched Arm Neoverse for the next-generation of cloud infrastructure, recognizing a world where delivering new levels of scalable performance on top of Arm's flexible and power-efficient compute platform could enable a systemic shift in the capabilities and costs of the data center ecosystem," he explained. "Fast forward to today, the adoption of Neoverse has reached new heights: close to 50 percent of the compute shipped to top hyperscalers in 2025 will be Arm-based," he added. Much of this momentum can, inevitably, be attributed to the rise of AI. AI is reshaping cloud infrastructure, driving explosive growth in compute demand and forcing hyperscalers to prioritize power efficiency at massive scale. Data centers are being designed in gigawatts, not megawatts, making efficiency a requirement rather than a differentiator, something that has been central to Arm's architecture for decades. That's not the only reason for the architecture's success of course. "The Arm compute platform is additionally giving our partners the flexibility to create a new generation of customized, differentiated silicon solutions for AI. For example, Nvidia's Grace Blackwell superchip for AI-based infrastructure combines Nvidia's Blackwell GPU accelerated computing architecture with the Arm Neoverse-based Grace CPU, integrated with an extraordinarily high bandwidth, coherent mesh network - a system tailor-made to achieve unmatched performance for AI workloads," Awad says. With ten of the world's largest hyperscalers developing and deploying Arm-based chips, the future looks bright for the company - but that dynamic could shift if, as rumored, Arm decides to produce its own silicon. Speculation on that front gained signifcant momentum after Arm's Japanese owner, SoftBank, acquired Arm-based chipmaker Ampere for $6.5 billion, raising concerns that Arm could end up competing directly with its partners in the fast-growing data center market.

ARM targets 50% of the AI market in 2025

British chipmaker ARM aims to triple its share of the artificial intelligence data center market by 2025. This ambition is underpinned by its original business model, growing compatibility and attractive energy efficiency. ARM Holdings, a company that is 90%-owned by SoftBank, specializing in chip architectures, is planning a spectacular breakthrough in the artificial intelligence sector. According to its latest projections, the company aims to increase its market share in AI data centers from 15% to 50% by next year. This is indeed a bold ambition, although is one that builds on a momentum that is already well underway. Royalties, design and efficiency Unlike manufacturers like Intel or Nvidia, ARM does not produce chips. Its model is based on the sale of designs and technical elements, accompanied by a system of royalties. These royalties are particularly lucrative in the field of AI, being higher than in traditional systems. As a result, giants such as Nvidia or Alphabet can offer chips stamped with their own name, while relying on ARM architecture. This is notably the case for the Grace chip, used in several Nvidia systems. At the same time, the energy efficiency of ARM architecture represents an increasingly valuable asset, as the energy cost of AI becomes a major issue in industry. For a long time, ARM's development was restrained by the dominance of x86 architecture, used by Intel and AMD. This ubiquitous standard made it difficult to switch to other architectures. However, the situation changed with Apple 's transition to its ARM-based M1 chips, followed by growing adoption in data centers. "We've reached the point where software is developed for Arm first and foremost," says Mohamed Awad, head of infrastructure at ARM. The movement is supported by several giants: Amazon has designed ARM chips in-house that represent over half of the capacity added to its data centers over the past two years. Google and Microsoft are following suit with more recent projects. With a lean business model, an increasingly adopted technology and strong partners, ARM seems well positioned to change dimensions in AI. It remains to be seen whether the pace can keep up to expectations.