An Nvidia Move Just Put AMD and Intel on the Defensive

Nvidia (NASDAQ: NVDA) has played a pioneering role in the field of artificial intelligence (AI) thanks to its graphics processing units (GPUs), whose massive parallel computing power has enabled the training of popular large language models (LLMs).

Importantly, Nvidia has maintained its dominance in the AI chip market, as evidenced by its recent results that showed a significant jump in revenue and earnings . The good news for Nvidia investors is that it is pulling the right strings to ensure that it continues to dominate this lucrative market. The company's entry into the server central processing unit (CPU) market is one such move, which has put this market's heavyweights -- Intel and Advanced Micro Devices -- on the defensive.

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AMD and Intel have a big reason to be worried right now

Server CPUs are in high demand right now, primarily due to the shift toward agentic AI and inference workloads in data centers. AMD notes that the server CPU market's revenue could increase at an annual rate of 50% through 2030, creating a $220 billion revenue opportunity by the end of the decade.

AMD and Intel have traditionally dominated the server CPU market. They manufacture chips based on the x86 architecture. However, the growing demand for agentic AI and inference workloads has triggered a shift toward Arm -based chips owing to their low power consumption and higher efficiency. Nvidia is capitalizing on this trend.

The AI bellwether's Vera server CPU is designed on Arm's architecture. The important thing to note is that Nvidia sees healthy demand for its stand-alone Vera server CPU. CFO Colette Kress remarked on Nvidia's August earnings call:

Today, we are in full production of our next-generation Vera CPU. As a stand-alone product, Vera expands our TAM even further. Vera completes agentic task, 1.8x faster on the spec benchmark and provides 5x the bandwidth per watt than any other data center CPU.

Kress added that the Vera CPU will be deployed by "every major hyperscaler, neocloud, AI lab, and system OEM." The company is already shipping this product to key customers and expects to sell $20 billion worth of Vera CPUs this year. What's more, Nvidia expects its Vera CPU revenue to double next year.

So, Nvidia's chip poses a clear threat to AMD and Intel, especially as the share of x86 server processors shrinks. Tom's Hardware noted in June that Arm-based servers account for 45% of the data center market's revenue share. Nvidia's prediction that its server CPU revenue will double next year suggests that Arm-based processors are on track to capture a larger share of this market, which doesn't bode well for Intel and AMD.