Intel has long dominated the server CPU market. (NASDAQ:INTC) and AMD (NASDAQ: AMD). Both companies manufacture chips based on the x86 architecture. There are other CPUs used for special purposes, such as IBM mainframes, but x86 reigns supreme in data centers. The software is compiled and optimized for x86 chips, which incurs significant switching costs.
Qualcomm (NASDAQ:QCOM) The company has already failed once to bring chips based on the Arm architecture, which dominates the smartphone market, to the server market. Qualcomm’s Centriq server CPUs failed to garner traction when they launched in late 2017, prompting the company to significantly scale back its efforts. Switching to a mix of Arm-based chips and architectures wasn’t worth the effort for major server CPU customers.
Qualcomm launched its first Arm-based PC CPU last year, and while it wasn’t necessarily a huge hit due to compatibility issues, Arm-based PCs may be here to stay. Qualcomm now appears to be trying to re-enter the server CPU market with a new chip.
Sailesh Kottapalli, an Intel veteran and chief architect of the Xeon server processor family, is joining Qualcomm after nearly 30 years at Intel, according to a LinkedIn post. In December, Qualcomm revealed in a job posting that its data center team was working on server products for data center applications. Kottapalli is expected to lead that effort.
Qualcomm’s PC chips offer solid performance and efficiency, although they have issues when using emulation to run certain types of applications, especially games. Qualcomm could build on that effort to target the data center market.
Back in 2018, Qualcomm had little chance of success with Centriq server CPUs. There was too much inertia behind x86 and the software ecosystem was centered around the dominant architecture.
Qualcomm may have better luck this time, thanks to artificial intelligence. Tech giants like Microsoft are investing heavily in building new AI data centers, and some are even designing their own Arm-based CPUs. Software stacks are still evolving and will gain even more momentum in 2025 than they did in 2018, as Microsoft, Amazon, and others lag behind Arm-based server CPUs.
The environment is more hospitable for Qualcomm, but the company, like any other company entering the market, will face competition from potential customers’ in-house chip design efforts. Nvidia already sells the Grace family of data center CPUs based on the Arm architecture, and if Arm continues to gain traction, others could follow.
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