Nvidia's Server CPU Ambitions Spell Trouble for AMD, Intel

Nvidia reported stellar Q2 fiscal 2027 results, with revenue soaring 106% year-over-year to $96.2 billion, driven by a 117% surge in data center revenue to $89 billion. The company's GPUs remain the cornerstone of AI infrastructure, but Nvidia is now setting its sights on the server CPU market, a domain long dominated by Intel and AMD.

During the earnings call, CFO Colette Kress revealed that Nvidia's Grace server CPU has already generated over $5 billion in trailing-twelve-month revenue. More importantly, Nvidia is now offering its next-generation Vera CPU as a standalone product, expanding its total addressable market. Kress stated that Vera is expected to be deployed by every major hyperscaler, neocloud, AI lab, and OEM, with shipments already underway to partners like OCI, SpaceXAI, and AWS.

Nvidia projects approximately $20 billion in server CPU revenue for 2026, a figure that would more than double by fiscal 2028. This aggressive growth forecast underscores Nvidia's intent to disrupt the server CPU market, which AMD estimates will be worth $220 billion by 2030.

The move is strategically significant because Nvidia's Vera CPU is based on Arm's v9.2-A architecture, while Intel and AMD rely on the x86 architecture. According to Tom's Hardware, Arm-based server CPUs already account for 45% of data center market revenue, and Counterpoint Research predicts they will capture 90% of the market by 2029.

Nvidia's entry into this space is not just about diversification; it's about leveraging its AI ecosystem to offer integrated solutions that combine GPUs and CPUs, potentially making its systems more attractive than those of competitors.

Nvidia's expansion into server CPUs directly challenges Intel and AMD, which have historically dominated this market. Intel's data center and AI segment grew 59% year-over-year to $6.3 billion in Q2, while AMD's data center segment grew 107% to $6.7 billion. However, Nvidia's data center revenue growth of 117% outpaces both, despite a much larger revenue base.

The shift toward Arm-based architectures is a critical threat to Intel and AMD, as their x86-based CPUs may lose market share. Arm's energy efficiency and performance for AI workloads make it increasingly popular among cloud providers. If Arm captures 90% of the server CPU market by 2029, Intel and AMD could see their core businesses erode significantly.

For Nvidia, this move strengthens its competitive moat. By offering both GPUs and CPUs, Nvidia can provide more integrated and efficient AI solutions, potentially increasing its share of customer wallets. The projected $20 billion in server CPU revenue for 2026 would add a substantial new revenue stream, further diversifying Nvidia's business beyond GPUs.

Analysts have already revised Nvidia's earnings estimates upward, reflecting optimism about its growth prospects. Despite its massive run-up, Nvidia's forward P/E ratio remains attractive compared to AMD and Intel, making it a compelling investment in the AI chip space.

Investors should watch how Intel and AMD respond to this threat. Intel has struggled with manufacturing challenges, while AMD has focused on both GPUs and CPUs. However, the architectural shift to Arm could force both companies to adapt or risk losing relevance.