Can Anything Cure Intel From ARM Fever?

Another day, another front that ARM Holdings (Nasdaq: ARMH  ) is assaulting. Intel (Nasdaq: INTC  ) already has plenty of arenas to defend; we might as well add another on to the growing list. Not only does the chip Goliath need to try to hold on to its lead on the server and laptop markets, but it now also has to worry about ARM-based supercomputers.

NVIDIA (Nasdaq: NVDA  ) has announced that the Barcelona Supercomputing Center (BSC) is now developing a new hybrid supercomputer that uses NVIDIA's quad-core ARM-based Tegra 3 CPUs alongside NVIDIA CUDA GPUs. It is the world's first, and it's probably not the last. Using the combination promises to improve performance without tacking on extra power consumption.

The projects leader, Alex Ramirez, says, "In most current systems, CPUs alone consume the lion's share of the energy, often 40% or more." Since the new architecture uses energy-efficient ARM-based chips, the project hopes to achieve a fourfold to tenfold increase in energy efficiency by 2014.

The BSC's long-term goal is to deliver next-generation performance and use 15 to 30 times less power than current supercomputer architectures.

This follows up an announcement last month of a similar hybrid supercomputer in the works. That one is being built by Cray (Nasdaq: CRAY  ) and will use thousands of Advanced Micro Devices (NYSE: AMD  ) CPUs matched with NVIDIA Tesla GPUs. The head of NVIDIA's Tesla unit, Steve Scott, says that adding one graphics chip to a supercomputer can eliminate the need for five to eight CPUs, which saves not only cost but also power.

Using ARM-based processors is another way to cut down on both costs and power requirements, compared with x86 offerings from Intel and AMD.

Intel's server and supercomputer chips are among Intel's most prized offerings. If it's not sweating yet, it should be. Just incorporating GPUs in supercomputers already represents a threat by eliminating the need for extra CPUs, and using ARM-based CPUs takes the hazard to a new level.

Last quarter, Intel's Data Center Group, which includes servers and such, had an operating margin of 48.6%, higher than the PC Client Group's 42.6%, which covers consumer notebooks and desktops. The PC Client Group still comprises the bulk of revenue, roughly two-thirds, but overall margins would take a hit if it starts losing traction in servers and supercomputers.

ARM fever continues to spread, and it sure helps that the chip designer has chip champions like NVIDIA, Qualcomm (Nasdaq: QCOM  ) , and Texas Instruments (NYSE: TXN  ) all backing it. This is one fever that can't be cured with more cowbell.

Add these chip players to your Watchlist to see whether Intel finds a cure.

Fool contributor Evan Niu owns shares of ARM Holdings, but he holds no other position in any company mentioned. Check out his holdings and a short bio. The Motley Fool owns shares of Qualcomm, Texas Instruments, and Intel and has bought calls on Intel. Motley Fool newsletter services have recommended buying shares of Intel and NVIDIA, writing puts in NVIDIA, and creating a bull call spread position in Intel. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.


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  • Report this Comment On November 15, 2011, at 9:14 PM, russfischer1013 wrote:

    Don't give up your day job. Intel has the answer:

    http://finance.yahoo.com/news/Intel-Plan-Remain-allthingsd-1...

    Basically the new chip is faster that anything NVDIA can show and runs legacy software.

    You should give up the ARM thing, by next year when the world sees the low power and high performance of Intel's 22nm TriGate transistors in real products, ARMH, TSMC and all the ARM licensees will be very afraid.

  • Report this Comment On November 15, 2011, at 9:47 PM, SSchlesinger wrote:

    Yet another in a long line of stories about ARMH winning in a market it hasn't entered. Okay, fair enough, but let's be a bit more skeptical about ARMH for a moment. Let's look at other tech stocks and their P/E.

    Microsoft -11

    Apple- 14

    Intel- 11

    ARMH- 78

    So, if you were to use Intel's 11 P/E with ARMH it's price would be $4.29. In other words there is a $25 premium per share on this stock. ARMH doesn't make any processors, they have companies like TSMC and Global Foundries as their foundries. They are having problems moving beyond 40nm, and when they get to 28nm it's where they are going to stay for years to come. Meanwhile Intel will be at 22nm in the next couple of months then 14nm in 2013. By 2016 they will be doubling the size of their production, cranking out an additional 90,000 wafers a month.

    Texas Instruments, Qualcom, and Nvidia have already done damage to each other trying to win ARM business from each other, and within the next six months Intel will enter their precious smart phone market.

    The ARMH marketing department is working on overtime coming out with press release after press release and yet the stock is struggling to keep above $30.

    We've heard all about the great ARMH expectations, now where are the results? ARMH isn't new, it's been around for about 20 years. Where are those record profits?

    My two cents. Two large pieces of hype about servers and supercomputers took the stock up from the $28 range to $30. The only wise investment I can see at this point is to short ARMH. The possibility of covering around the $28 range is probably pretty good. This stock can drop into the $26 range on bad economic news days. It usually floats around $28/$29. I think by next year once Intel is in their precious smart phone market this stock will be south of $20.

    I wouldn't suggest owning this stock at it's current price, too much downside potential.

  • Report this Comment On November 16, 2011, at 1:34 PM, jpanspac wrote:

    This article ignores the massive, and I mean massive, amount of reprogramming that an ARM-based computer would require. Not going to happen.

  • Report this Comment On November 16, 2011, at 4:36 PM, Brettze wrote:

    I still prefer AMD over those ARM style variety... I dont use smartphone daily.. it is too tiny for me ..

  • Report this Comment On November 16, 2011, at 4:39 PM, Brettze wrote:

    I pay by day usage... for my smartphone but Boostmobile charges me $10 minimum or 5 consecutive days which is stil the best deal in town.. I ask Boostmobile to please allow me to use my smart phone one day a time at $2 a pop .. I hope they will reconsider... I use my smartphone as a WiFi access primarly... 3G or 4G is nice but not for everyday usage, no thanks.. I dont need it. I want to be able to use it one day a time and turn off 3G anytime I want to.

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