Arm expects its share of data center CPU market sales to rocket to 50% this year

Arm Holdings expects its share of the global market for data center central processing units to surge to 50 percent by the end of the year, up from about 15 percent in 2024, with gains driven by the boom in artificial intelligence, a senior executive said.

Arm's CPUs are often used as a "host" chip inside an AI computing system and function as a kind of traffic controller for other AI chips. Nvidia, for example, uses an Arm-based chip called Grace in some of its advanced AI systems, which contain two of its Blackwell chips.

Arm's tech in many cases offers lower power consumption than rival processors made by Intel and Advanced Micro Devices (AMD), Mohamed Awad, Arm's infrastructure chief, told Reuters.

As AI data centers use vast amounts of electricity, Arm's chips have become increasingly popular among cloud computing companies.

Awad added that data center chips often use more of Arm's intellectual property and the company typically receives "a lot higher aggregate royalty rate" than chips for less complex devices.

UK-headquartered Arm, which is 90 percent owned by Japan's SoftBank Group, does not make chips itself but sells the fundamental building blocks and other intellectual property to cloud computing companies and firms like Apple and Nvidia to use to design chips for laptops, smartphones and data center processors.

Arm generates revenue by billing companies for a license to use its tech and collects royalty payments for each chip sold.

It struggled to make headway in the lucrative data center market for nearly two decades, as switching over from the once dominant x86 chips made by Intel and AMD means clients have to rewrite software as well as change up parts of hardware.

"We've gotten to the point where software is actually being developed for Arm first and foremost," said Awad.

Amazon.com has designed in-house data center CPUs with Arm tech that accounted for more than half of the capacity for chips it added over the last two years, Amazon said in December.

Alphabet's Google and Microsoft have also made Arm-based data center chips, though their efforts are more recent than Amazon's.