Arm is going to use Nvidia to capture half of the data center processor market

Arm Holdings expects to own up to 50% of the global market for central processing units (CPUs) used in data centers by the end of 2025. According to a company representative, Arm’s share was about 15% in 2024. The prerequisite for significant growth is the sharp rise in the popularity of computing systems designed for AI tasks, where CPUs based on the Arm architecture are actively used.

Image source: arm.com

Arm processors are used as host components in AI infrastructure. Their role is to manage data flows between high-performance graphics accelerators (GPUs). As an example, Mohamed Awad, head of infrastructure solutions at Arm, cited server systems from Nvidia, which use the company’s Grace processor based on the Arm architecture. In some systems, Grace works together with two new-generation Blackwell GPUs, also created by Nvidia.

Awad emphasized that Arm’s architecture demonstrates an advantage in terms of power consumption compared to competitors, including processors from Intel and AMD. Since AI systems require significant energy resources, the need for energy-efficient architectures is driving demand for Arm products among cloud computing providers.

Arm earns higher overall royalties on CPUs designed for data centers because those chips use more of the company’s intellectual property, compared with less complex computing solutions found in consumer devices, Awad said. Arm doesn’t make its own chips; it licenses the architecture and provides the intellectual property to other companies, including cloud providers and manufacturers like Apple and Nvidia, to build CPUs for servers, laptops, and smartphones. Arm’s revenue comes from licensing fees for the use of its technology and royalties for each chip it makes.

For nearly two decades, Arm failed to gain significant market share in the server CPU space due to the dominance of the x86 architecture developed by Intel and AMD. Switching to the Arm platform required customers to adapt their software and change their hardware. However, according to Awad, the situation has changed: software development is now increasingly being done directly for the Arm architecture.

Amazon reported in December 2024 that over the past two years, more than half of the computing power in its new servers has come from CPUs built by Amazon and based on the Arm architecture. According to Reuters, Alphabet (which owns Google) and Microsoft have also begun developing their own server CPUs using Arm technology. Their projects came later than Amazon’s efforts.