Intel Stock Sinks on report Microsoft may build its own chips for Azure servers

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Shares of chip makers

Intel

and Advanced Micro Devices took a hit on a report late Friday that

Microsoft

is developing its own microprocessors for servers used in its Azure cloud service and possibly for its Surface personal computers.

Bloomberg reports that Microsoft is using designs based on Arm technology to build a processor for use in its data centers, and that the company is also considering building another chip for Surface devices. Arm is owned by SoftBank (SFTBY), which has agreed to sell the company

Nvidia

(NVDA).

The story notes that the move follows a similar effort

Amazon.com

(AMZN) and other companies with large server farms.

Apple

(AAPL) recently announced the first MacBook Air and MacBook Pro laptops with in-house designed processors based on Arm technology.

“Because silicon is a fundamental building block of technology, we will continue to invest in our own capabilities in areas such as design, manufacturing and tools, while also encouraging and strengthening partnerships with a wide variety of chip vendors,” said Microsoft spokesman Frank Shaw. in a statement.

Neither Intel nor AMD immediately responded to a request for comment.

Patrick Moorhead, an analyst at Moor Insights & Strategy, noted that there is “heated competition” in the cloud infrastructure market, adding that he would not be surprised by Microsoft’s move to overtake Amazon Web Services. “Silicon is strategic, not a commodity, and the industry was finally aware of this,” he added.

Intel fell 6.3% to $ 47.46 Friday, while Advanced Micro Devices fell 1% to $ 95,952, after trading to $ 93.56. Microsoft shares fell 0.4% to $ 218.59.

Write to Eric J. Savitz at [email protected]