AI Data Center Chip Track Welcomes New Powerhouse! Arm (ARM.US) Launches AGI CPU to Challenge Nvidia and AMD, Targeting 15 Billion in Sales

Bloomberg News has learned that chip design company Arm Holdings (ARM.US) will begin selling its own chips for the first time, and it is expected that this business will generate approximately $15 billion in annual revenue within five years. Arm announced at an event in San Francisco on Tuesday that Meta Platforms (META.US) will be the first major customer for its AGI CPU chip. Arm stated that the product will feature up to 136 cores (a measure of processing power) and consume 300 watts of power. The chips will be manufactured by TSMC (TSM.US).

As part of this strategic shift, Arm has set ambitious sales targets for the coming years. The UK-based company expects that revenue from the new chip business will surpass its current revenue from intellectual property sales. Arm said this will help achieve a total sales volume of about $25 billion within five years, five times its current level. The company also forecasts continued growth in its intellectual property business, reaching approximately $10 billion. During this period, earnings per share are projected to reach $9. Analysts estimate that for this fiscal year (excluding certain items), earnings per share will be $1.75.

Under the leadership of CEO Rene Haas, Arm has transformed from a provider of smartphone chip technology to playing a more significant role in the data center market. This move aims to help the company derive more profit from typically complex and costly work. It also allows Arm to benefit from bulk purchasing. Even the most expensive smartphone chips cost tens of dollars, while high-end data center semiconductor chips can cost tens of thousands of dollars.

The new sales outlook has boosted Arm’s stock, which rose over 8% in after-hours trading as of press time. As of Tuesday’s close, the stock has gained 23% this year.

Haas said that the reason Arm decided to develop this new chip was due to customer demand. The product is a central processing unit (CPU), often called the brain of a computer, designed to work in tandem with accelerators provided by companies like Nvidia (NVDA.US). Arm stated that it helps coordinate work between computers, prepare data, and run related components to respond to user AI queries.

“Haas said, ‘The products we are building are not only highly attractive but are already in demand with customers waiting to buy them.’”

The company claims that its products are more energy-efficient than traditional CPUs from Intel and AMD (AMD.US). Haas explained that this means data center operators can achieve more powerful computing within the same footprint and power budget. Haas noted that Arm’s growing influence poses a direct threat to Intel and AMD’s so-called x86 data center products. He believes that capturing market share from these traditional giants in a rapidly expanding market will enable his company and its customers to grow. “The market is large enough to support multiple players,” Haas said.

Arm faces fierce competition in the data center processor space. Many startups and established companies are trying to challenge Nvidia’s dominance through various means. Nvidia itself has recently launched a series of new CPU products targeting the same market Arm is entering. Haas said that his chips target a different market segment than Nvidia’s latest offerings. Arm’s chip strategy could also complicate relationships with customers, as most large data center clients, including Meta, have their own chip R&D projects. Nearly all of these customers also license technology and designs from Arm.

Data center operators source chips from multiple suppliers, including Meta. Meta recently signed long-term agreements with Nvidia, AMD, and startup Cerebras Systems. The social media giant plans to use AGI CPUs alongside its other chips.

Meta Infrastructure Chief Santosh Janardhan said, “We collaborated with Arm to develop the Arm AGI CPU to deploy efficient computing platforms, significantly improving our data center performance density.”

Arm stated that other companies, including OpenAI, Cerebras, and SK Telecom, also plan to deploy AGI CPUs in their infrastructure. Currently, vendors like Supermicro (SMCI.US) have begun selling ready-made systems equipped with these chips. Arm expects these systems to be widely available later this year.

Under Haas’s leadership, Arm’s revenue has grown over 20% annually. In 2025, annual sales are expected to surpass $4 billion for the first time. Meanwhile, Arm’s profitability remains remarkably high, with its recent quarterly gross margin (percentage of revenue after production costs) reaching 98%.

Most of Arm’s industry peers generate much higher sales but have lower profit margins. Even Nvidia, which nearly monopolizes AI accelerators, has a profit margin of just over 70%. However, Arm’s revenue accounts for only a small portion of Nvidia’s total income: Wall Street estimates that Nvidia’s annual sales this fiscal year could reach $356 billion.

SoftBank holds the majority stake in Arm and is also ramping up efforts to enter the AI data center space, including acquiring chip startups and making significant investments in data center owners.