Two years after Amazon.com (AMZN) – Get the report presented an Arm-architecture server processor to be deployed in AWS data centers, looks like Microsoft (MSFT) – Get the report working on something similar for Azure data centers.
Bloomberg reported on Friday afternoon that the software giant is developing both an Arm processor for use in its own data centers and “exploring the use of another chip that would power part of its Surface line of personal computers.” Convincingly, the server’s CPU could be used both for cloud computing instances provided to Azure customers and to run some of the many Microsoft applications and services delivered through Azure data centers.
The news led Intel (INTC) – Get the report stock already beaten to fall by more than 9% since Thursday’s close. Intel shares have now fallen 24% from that year.
Here are some thoughts on the Bloomberg report:
1. It is in Microsoft’s interest to counter Amazon’s Arm Server processor efforts
Intel and AMD (I HAVE D) – Get the report X86 server-architecture CPUs are still a better choice than Arm CPUs for many workloads and, for the time being, claim a much wider software ecosystem. But like Nvidia (NVDA) – Get the report was anxious to stress when he announced his agreement to buy Arm, Arm server CPUs have a fairly large amount of momentum at the moment, thanks to both Arm’s research and development for its Neoverse CPU microarchitectures, and and the efforts of CPU server arm developers.
The Amazon Arm Graviton2 processor can withstand the x86 CPU when running some (though not all) workloads. And this, along with aggressive pricing, has allowed AWS to attract high-quality customers to Graviton2-based cloud computing instances.
It is clearly in Microsoft’s interest to offer Azure customers an alternative to Graviton-based instances. And along the way, you could also get some cost savings by using its Arm processors to handle certain internal workloads.
2. It is far from clear whether Microsoft will – or should – develop an Arm processor for surface devices
Although it says it is “possible” that Microsoft’s efforts to produce a chip for Surface devices, Bloomberg says they are “more likely” to produce a server product. He also notes that the Microsoft chip design unit is reporting to Azure chief Jason Zander.
Moreover, Microsoft has already worked with Qualcomm (QCOM) – Get the report in recent years on custom Arm processors – known as the Microsoft SQ line – for its Surface Pro X devices. Given that SQ processors are able to capitalize on the considerable research and development work of the Qualcomm mobile processor and given that PC Armor-based Windows are still a niche market, the reason for Microsoft to design an Arm processor for Surface devices on its own is probably shaky.
3. The Intel Selloff feels a little excessive
I will be the first to notice that Intel has its share of problems right now, between the powerful execution of AMD, the growing threat of the Arm processor, the delay of its 7 nm manufacturing process and some of the problems it faces because it works to solve 10nm CPU line. But the sale seen in the Bloomberg report for a stock that was already trading at a discount assessment feels too much, even if the report is certainly bad news.
First, as mentioned earlier, there is a good chance that Microsoft Weapon’s processing efforts will not extend to PC processors. And even if they do, Microsoft’s silicon-powered Surface devices will continue to compete against many, many x86-powered Windows PCs (including, most likely, new x86-powered Surface devices). And for now, Windows x86 PCs can claim both a much more powerful developer ecosystem than Arm Windows PCs, and the continued loyalty of most businesses, next-generation Windows notebook buyers, and gamers.
Second, assuming that Microsoft provides Azure computing instances powered by its own Arm processors, it is still up to Azure customers to choose whether or not to use them. And while the momentum of Arm server processors is undeniable, a lot of companies and government agencies remain loyal to x86 and are likely to take a cautious approach to adopting a new CPU architecture.
4. Microsoft could conceivably work with Marvell on its CPU Arm Server project
Last year, Microsoft began using Marvel’s (MRVL) – Get the report ThunderX2 Arm server CPU within Azure data centers to manage some internal workloads. And a few months ago, Marvell announced that it was putting an end to research and development on the available ThunderX CPUs in favor of developing custom Arm processors for internet / cloud giants (proverbial hyperscalaries).
Given Marvell’s changing strategy, and how Microsoft has collaborated with Intel, AMD, and Qualcomm over the years on custom chip projects, it wouldn’t be exactly a shock to learn that Marvell is helping Microsoft develop Arm server processors.
5. Don’t be surprised if similar news arrives about Google
While Google (Google) – Get the report the cloud infrastructure business is not as big as Amazon or Microsoft, it is growing rapidly. And perhaps more importantly, Google has massive internal loading needs that could be partially addressed by Silicon Arm.
Take the effect that Google has already implemented internally designed AI accelerators – its tensor processing units (TPUs) – in its data centers and it’s easy to see them tracking Amazon and (apparently) Microsoft’s leadership in designing its own server CPU arm .
On the other hand, Google may instead choose to rely on the Ampere and / or Nuvia startups, each of which makes impressive statements about the Arm server processors they are preparing. Indeed, the recently released Other processor from Ampere looked quite competitive in some areas.
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