Two years after Amazon.com (AMZN) – Request report unveiled an Arm architecture server CPU to deploy in AWS data centers, it looks like Microsoft (MSFT) – Request report is working on something similar for Azure datacenters.
Bloomberg reported Friday afternoon that the software giant is developing an Arm CPU for use in its own data centers as well as “exploring it using another chip that would power part of its Surface line of personal computers.” Conceivably, the server CPU could be used to power cloud computing instances to Azure clients as well as run some of the many Microsoft apps and services provided through Azure datacenters.
The news has led Intel (INTC) – Request report already battered stock is down more than 9% from close on Thursday. Intel shares are now down 24% from the year.
Here are a few thoughts on Bloomberg’s report:
1. It is in Microsoft’s interest to counter the efforts of Amazon’s Arm Server CPU
Intel and AMDs (AMD) – Request report x86 architecture server CPUs are still a better choice than Arm CPUs for many workloads, claiming a much broader software ecosystem for now. But if Nvidia (NVDA) – Request report was keen to highlight when it announced its deal to buy Arm, Arm server CPUs are experiencing quite a bit of momentum right now, thanks to both Arm’s R&D work for its Neoverse CPU microarchitectures and the efforts of Arm server CPU developers .
Amazon’s Graviton2 Arm CPU can hold its own against x86 CPUs when running some (but not all) workloads. And that, along with aggressive pricing, has enabled AWS to bring in some high profile clients for Graviton2 powered cloud computing instances.
It is clearly in Microsoft’s interest to provide Azure customers with an alternative to Graviton-powered instances. And along the way, it can also deliver some cost savings by using its Arm CPUs to handle certain internal workloads.
2. It is far from clear whether Microsoft wants – or should – develop a lean CPU for Surface devices
Bloomberg argues that it is “possible” that Microsoft’s CPU efforts will produce a chip for Surface devices, but they are “more likely” to deliver a server product. It also notes that Microsoft’s chip design unit reports to Azure chief Jason Zander.
In addition, Microsoft already cooperated with Qualcomm (QCOM) – Request report in recent years on custom Arm processors – they are known as the Microsoft SQ line – for its Surface Pro X devices. Given that the SQ processors are capable of leveraging Qualcomm’s significant R&D work on mobile processors, and given that Arm-based Windows PCs are still a niche market, the rationale is for Microsoft to design an Arm processor for Surface devices on its own, unquestionably.
3. Intel’s Selloff feels a bit over the top
I’ll be the first to notice that Intel has issues right now, between the strong AMD performance, the growing Arm CPU threat, the 7nm production slowdown, and some of the issues it faces while working to are 10 nm work out. CPU setup. But the selloff seen in the Bloomberg report for a stock that was already trading at a discount feels like too much, even if the report is certainly bad news.
First, as noted earlier, chances are Microsoft’s Arm CPU efforts won’t extend to PC CPUs. And even when they do, Surface devices powered by Microsoft silicon will still compete with many, many x86-powered Windows PCs (including, most likely, new x86-powered Surface devices). And for now, x86 Windows PCs can claim both a much stronger developer ecosystem than Poor Windows PCs and the continued loyalty of most enterprises, buyers of high-end Windows notebooks, and gamers.
Second, assuming Microsoft provides Azure computing instances powered by its own Arm CPUs, it’s still up to Azure clients to choose whether or not to use them. And while the momentum of Arm server CPUs is undeniable, many businesses and government agencies are both sticking to x86 and will likely be careful when adopting a new CPU architecture.
4. It is conceivable that Microsoft could partner with Marvell on the Arm Server CPU project
Last year, Microsoft started using Marvell’s (MRVL) – Request report ThunderX2 Arm server CPU within Azure datacenters to handle certain internal workloads. And a few months ago, Marvell announced that it was ending R&D work on standard ThunderX CPUs in favor of developing custom Arm CPUs for internet / cloud giants (the proverbial hyperscalers).
Given Marvell’s change of strategy and the way Microsoft has partnered with Intel, AMD, and Qualcomm, among others, over the years on custom chip projects, it wouldn’t be exactly a shock to learn that Marvell is helping Microsoft develop Arm server- CPUs.
Don’t be surprised if similar news about Google arrives
While Google’s (GOOG) – Request report cloud infrastructure operations are not as large as those of Amazon or Microsoft, but they are growing fast. And perhaps more importantly, Google has massive internal workload needs that can be partially addressed by Arm Silicon.
Throw in the effect that Google has already implemented internally designed AI accelerators – the Tensor Processing Units (TPUs) – in its data centers, and it’s easy to see them following Amazon and (apparently) Microsoft’s lead in designing its own arm server CPUs.
On the other hand, Google could choose to rely on the startups Ampere and / or Nuvia, each of which has made impressive claims about the Arm server CPUs they are preparing. As it is now, Ampere’s recently launched Altra CPU looked quite competitive in certain benchmarks.
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