Arm Holdings anticipates a significant expansion in its share of the global data center central processing unit (CPU) market, projecting an increase from approximately 15 percent in early 2024 to 50 percent by the end of the year.
This surge is being driven by the adoption of artificial intelligence (AI) technologies and the growing demand for energy-efficient computing solutions, Reuters.com said in an exclusive news report.
Meanwhile, Arm said Arm Neoverse has become the preferred platform for cloud service providers seeking better price-performance and energy efficiency. Companies like AWS, Google Cloud, Microsoft Azure, and Oracle Cloud are leveraging Neoverse-based silicon for significant gains.
The growing availability of Arm-based cloud instances is driving a migration from legacy platforms, as modern, cloud-native, and AI-enabled software performs optimally on Arm. Organizations such as Uber, Spotify, and Datadog are already making the shift to benefit from improved efficiency, AI optimization, and lower carbon footprints. Arm is also expanding its cloud migration resources and developer engagement to support this transition.
Arm’s Growing Role in AI Computing Systems
Arm’s CPUs serve a crucial role as “host” chips in AI computing systems, acting as traffic controllers that manage the workload between other AI processors. Notably, Nvidia integrates Arm-based chips, such as the Grace CPU, into its high-performance AI systems, including configurations featuring dual Blackwell AI chips. This strategic integration highlights Arm’s growing influence in the AI infrastructure space.
Advantages Over Traditional x86 Processors
One of the primary reasons for Arm’s rising popularity in data centers is its superior power efficiency compared to traditional x86 processors manufactured by Intel and Advanced Micro Devices (AMD).
According to Mohamed Awad, Arm’s infrastructure chief, data centers require massive amounts of electricity to power AI workloads, making energy efficiency a top priority. Arm’s processor architectures enable reduced power consumption, leading to lower operational costs and a more sustainable approach to AI data center operations.
Additionally, Awad emphasized that data center CPUs typically incorporate a greater portion of Arm’s intellectual property (IP), allowing the company to command higher aggregate royalty rates compared to chips used in lower-complexity devices such as smartphones and laptops.
Arm’s Business Model and Market Strategy
Unlike traditional semiconductor manufacturers, UK-based Arm does not fabricate its own chips. Instead, it licenses its fundamental CPU architecture and intellectual property to tech giants such as Apple, Nvidia, and major cloud computing companies. These firms then design custom processors tailored to their specific needs. Arm’s revenue stream is derived from licensing fees and royalties on every chip sold that incorporates its IP.
Arm, which is 90 percent owned by Japan’s SoftBank Group, has struggled to break into the competitive data center market. The dominance of x86-based processors from Intel and AMD created a barrier for Arm-based alternatives, as adopting Arm CPUs often required cloud providers and enterprises to rewrite software and modify hardware components. However, this dynamic is shifting as more companies prioritize power efficiency and performance optimization.
The Rise of Arm-First Software Development
A critical factor in Arm’s increasing adoption within data centers is the growing ecosystem of software optimized for its architecture. “We’ve gotten to the point where software is actually being developed for Arm first and foremost,” Awad stated, underscoring the paradigm shift occurring in the industry.
Amazon.com has been at the forefront of this transition, leveraging Arm-based processors in its AWS cloud infrastructure. According to Amazon, more than half of the data center CPUs it added over the past two years were Arm-based, reflecting a strong commitment to the technology. Other cloud providers, including Alphabet’s Google and Microsoft, have also begun developing their own Arm-based processors, though their initiatives are relatively recent compared to Amazon’s.
InfotechLead.com News Desk
