Shares of Arm (ARM) rocketed more than 15% higher in early trading Wednesday, after the company unveiled its first production data center processor: the Arm AGI CPU (central processing unit).
Arm has traditionally licensed its intellectual property to other companies to develop their own chips, including Apple and Nvidia (NVDA), which uses Arm’s capabilities in its Grace and Vera CPUs.
Graphics processing units, or GPUs, have dominated data centers thanks to their ability to train and run AI models. But as running those models becomes a more common use case than training and as the industry transitions toward agentic applications — AI that can perform tasks on your behalf — CPUs are becoming more important.
That provides Arm with the opportunity to launch its own processor. The company isn’t just debuting a chip, though; it’s also unveiling a server rack to run them at scale.
And while X86-based chips like those from Intel (INTC) and Advanced Micro Devices (AMD) generally dominate data centers, Arm said its CPU delivers twice the performance per rack compared to those other platforms.
Arm said it co-developed the AGI CPU with Meta (META), which is deploying them alongside its own custom chips inside its data centers.
Beyond Meta, Arm said it’s also working with Cerebras, Cloudflare (NET), F5 (FFIV), OpenAI (OPAI.PVT), Positron (POSC), Rebellions, SAP (SAP), and SK Telecom (SKM), which will use the chip for agentic AI applications, among others.
Despite Wall Street’s exhuberance for Arm’s new chip, BofA Global Research analyst Vivek Arya pointed out in a note to investors that the company is far from the only CPU game in town.
“We highlight the CPU market is getting very crowded. Incumbents in both x86 and ARM have much wider breadths of portfolio and established software/ecosystem, catering to enterprise/telco customers,” he wrote.
“Hyperscalers have their own customized CPUs, while [Arm’s] key customers Meta/OpenAI also have existing CPU agreements with AMD/NVDA, leaving limited opp’ty for the AGI CPU. Moreover, the bigger AI grows, the more pressure [Arm’s] smartphone/consumer markets would have from limited memory supplies.”
Earlier this month, Meta and Nvidia announced an expanded deal in which Nvidia will provide the social media giant with the largest deployment of its Grace CPU-only servers to date.
Then just last week, AMD announced its own deal with Meta, which includes servers running the company’s Venice and next-generation Verano CPUs.
And during Intel’s Jan. 22 earnings call, CEO Lip-Bu Tan cited AI as a major driver for CPU demand.
