Advanced Micro Devices (NASDAQ:AMD) and NVIDIA (NASDAQ:NVDA) have been locked in an intense battle for GPU (graphics processing unit) supremacy. AMD has momentum on its side as its market share has shot up to almost 30% from just 18.8% in 2015, thanks to its focus on selling budget GPUs.

AMD now wants to take itself a notch higher, which is why it is targeting the high-end GPU space with the new Vega GPUs for consumer and professional grade PCs. But this isn't the only front where the chipmaker is looking to engage NVIDIA. AMD's latest contract win indicates that it is now making inroads into the lucrative data center business that's been a big catalyst for NVIDIA so far.

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AMD scores a win at a NVIDIA customer

Cloud services leader Amazon has decided to tap AMD's FirePro server GPUs and its multi-user GPU technology to power its Graphics Design instance type. The Graphics Design instance type will allow users of Amazon AppStream 2.0 to run graphics applications in the cloud while reducing the cost of streaming such applications by as much as 50%.

AMD is providing Amazon with four different varieties. The different sizes and scales of the configuration that AMD is offering can be selected by users based on their requirements to run use cases pertaining to gaming, media, design, and engineering, among others. This is, undoubtedly, a big win for AMD as Amazon has usually tapped NVIDIA for its GPU requirements.

For example, the other two instances of the AppStream 2.0 -- Graphics Desktop and Graphics Pro -- are powered by NVIDIA's Tesla GPUs and accelerators. The adoption of NVIDIA's cloud-focused GPUs has boosted the company's data center revenue substantially of late, with revenue from the segment rising 175% year over year in the latest quarter.

But AMD's latest splash in the segment should have NVIDIA worried as this isn't the first time that one of its customers has decided to multi-source its GPUs. Google, for instance, uses NVIDIA's Tesla GPUs on its Compute Engine, but AMD has made inroads over here as well. In November last year, AMD announced that Google will deploy its FirePro server GPUs in 2017 for accelerating the performance of the Google Compute Engine and Google Cloud Machine Learning.

Alibaba is another cloud computing player that has decided to tap AMD's technology for deployment across its data centers globally. This was after Alibaba had signed a strategic pact with NVIDIA in early 2016 to offer GPU as a service.

But AMD's Amazon contract could turn out to be its biggest win as Amazon Web Services currently leads the cloud service provider (CSP) market by some distance. This puts AMD in a strong position to tap the GPU acceleration market, which seems set for solid growth thanks to the rise of tech trends such as the Internet of Things and Artificial Intelligence (AI).

These trends will lead to a data explosion in the future, and stand-alone server CPUs won't be powerful enough to perform huge calculations in a short time. This is where the GPU accelerators will come into play as they can compute a lot more data in less time and at a fraction of the cost. AMD, therefore, can expect a big boost to its data center business.

AMD's EPYC server chip could be another catalyst

AMD enjoys an advantage over NVIDIA thanks to its recently launched server chip -- EPYC. This new server CPU (central processing unit) has received a good response from OEMs (original equipment manufacturers) and CSPs; AMD claims that it can outperform rival chips from Intel.

In fact, AMD has already tied up with key cloud players in China such as Tencent and JD.com, as well as infrastructure providers such as Sugon and Lenovo for its EPYC server CPUs. In all, the company claims to have received commitments from 20 companies for the new chip. These partnerships could be a gold mine for AMD as China's data center market is expected to clock an annual growth rate of 13% until 2020.

Therefore, AMD will have the opportunity to cross-sell its FirePro GPUs to its server CPU customers. This could knock the wind out of NVIDIA's data center sales, as AMD looks set to win more market share provided its execution is as strong as it has been in the PC business.

Harsh Chauhan has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Amazon, JD.com, and Nvidia. The Motley Fool has a disclosure policy.