When Will ARM Invade the Server Market?

Servers have always primarily been x86 processor territory ruled by the likes of Intel (Nasdaq: INTC  ) and Advanced Micro Devices (NYSE: AMD  ) . With the momentum that ARM Holdings (Nasdaq: ARMH  ) --based chips have gathered in mobile thanks to advantages in power efficiency, can its legion of licensees crack into the lucrative server market?

The first seeds were laid several months ago, when Hewlett-Packard (NYSE: HPQ  ) announced a new line of servers running on ARM-based chips from small chipmaker Calxeda. The first run is meant for testing  -- purposes, so potential adopters can get a feel of what an ARM-based server offers, namely, lower power consumption.

In a recent interview at the Consumer Electronics Show, ARM CEO Warren East detailed a potential timeframe for ARM chips to make a meaningful impact on the server market. East pegged 2014 as the year as its 64-bit processor designs see the light of day. The company put together a server game plan as early as 2008, but realized back then it would likely be a six-year endeavor. His comments echo those he made back in December 2010 regarding 2014 as the year to mark.

This comes shortly after ARM licensee NVIDIA (Nasdaq: NVDA  ) announced that its ARM-based Tegra chips had made it into a new hybrid supercomputer at the Barcelona Supercomputing Center, another area that Intel and AMD command. These are still early-stage developments that have little likelihood of affecting Intel or AMD in these segments anytime soon, but it's a start.

Current ARM processors are 32-bit, and a large number of server software applications are written for 64-bit chips, putting ARM at a disadvantage to its x86 rivals. East said, "Today ARM is a 32-bit processor and so we just have to accept the fact that those server workloads where the assumption is 64-bit, we can't do it."

ARM introduced its first 64-bit architecture late last year, but chips take years before they make it to market and the first 64-bit ARM chips aren't expected until 2014. The new architecture handles memory and storage better, both critical functions for server applications.

At the same time, it's not like Intel and AMD will be sitting still for the next two years. Intel is pushing into ARM territory with its Medfield Atom chip, which improves on power consumption relative to older Atom processors. Intel is clearly starting to realize the importance of power efficiency, a department that ARM currently leads.

If Intel can apply the lessons it's learning with Medfield to its server processors, it has a better chance of fending off ARM's invasion. It will be an interesting couple of years to see if either side can invade the other's turf.

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Fool contributor Evan Niu has sold a bullish put spread on NVIDIA. He owns shares of ARM Holdings, but he holds no other position in any company mentioned. Click here to see his holdings and a short bio. The Motley Fool owns shares of Intel. Motley Fool newsletter services have recommended buying shares of NVIDIA and Intel; 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 may not 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.


Read/Post Comments (3) | Recommend This Article (5)

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Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On January 21, 2012, at 10:54 PM, balcobulls wrote:

    This ARM agreement is going to be an amazing move for NVDA. ARM has always been known to put outstanding products out, that is energy friendly. NVDA has also been known to only produce great products with energy conserving chips. This marriage between both ARM and NVDA is going to be great for the consumer and for the these two companies. Look for NVDA to drop back down to the mid 13's again, start building your position!!!

  • Report this Comment On January 22, 2012, at 10:32 AM, rav55 wrote:

    ARM is trying to penetrate the "big tin" market with a pip-squeak cpu. Yes it's low power becasue it is also low bit-rates too. AMD and Intel own the the server market with large high-performance cpu's. Already Intel is pushing down the envelope with high performing low power chips and AMD already has the best CPU/APU combination in the market.

    Moving data takes energy. If you want to move a lot of data then that takes a lot of energy. Not many IT managers will risk untried technology with underperforming cpu's to save on the electric bill.

    In area's that are not performance critical maybe ARM has a place but when you factor in the need for a new O/S with new hardware I really can't see the benefit of buying cheap chips. ARM's invasion into the server market might be akin to a mosquito's bite.

    It's good hype to pump an already overbought stock.

    I think that Sanford Bernstein coverage in Barrons has it right. ARM for servers and PC's is way out of reach.

  • Report this Comment On January 22, 2012, at 11:56 PM, jdwelch62 wrote:

    Let's look at the calendar: it's January of 2012 now. Intel's 22nm chips with Tri-Gate transistors are supposed to hit the market in 2013, if I'm not mistaken. By the time ARM-based 64 bit server chips show up in 2014, it'll be too late. Sure, some will get bought, but as rav55 said, it'll be a mosquito bite to Intel, and even AMD shouldn't be bothered by it.

    My prediction: By the end of 2014 Intel will have made huge inroads in the mobile market, in both smartphones and tablets, both Win8 & Android, while so-called WinARM will barely show up in terms of market share anywhere...

    But keep it up, Evan, I enjoy reading your articles; they amuse me.

    Fool on... :-)

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