Arm Chips Look to Expand Data Center Presence
This is a highlight summary of Episode 24 of the Circuit with Ben Bajarin and Jay Goldberg.
Arm-based processors have conquered the mobile world, powering nearly all smartphones and tablets globally. Yet the architecture has struggled to make similar inroads into data center servers, where Intel’s x86 has ruled for decades. However, Arm’s position now appears poised for meaningful growth.
Industry experts point to Oracle’s recent embrace of Arm-based cloud servers from Ampere Computing as a watershed moment. Oracle’s shift overcomes a longstanding barrier – the lack of software optimized for Arm in the data center. Though Arm’s share of server CPUs remains under 5% currently, evidence mounts it can deliver competitive performance, especially for cloud-native and AI workloads.
While Nvidia’s Arm-based GPUs already claim the lion’s share of AI model training today, most long-term growth resides in inference processing. Workloads are diversifying beyond CPUs, playing directly to the wide breadth of Arm’s IP portfolio spanning accelerators, networking, storage and more. Hyperscalers like Amazon and Google will likely develop custom Arm-based solutions in-house. But merchant silicon providers still have ample room to expand the Arm server ecosystem.
Yet pricing poses challenges for Arm in the data center. With production volumes far lower than phones, Arm must rethink its licensing model traditionally based on small per unit royalties. Its upcoming IPO prospectus may offer the first glimpse into whether Arm can increase its revenue base as data center IT budgets swell, especially for AI.
In conclusion, while Arm appears strategically positioned to capitalize on surging data center demand, competitive and pricing risks remain. Much depends on Arm’s ability to extract greater value from its data center partners while attracting new licensees beyond the largest cloud titans who design their own silicon. But with software and ecosystem barriers falling, Arm looks well placed to substantially grow its data center presence after years of gradual adoption.