Intel (INTC) Shares Down 4.18% after Nvidia’s Announced Entry into CPU Market Forces

UTC by Godfrey Benjamin · 3 min read
Intel (INTC) Shares Down 4.18% after Nvidia’s Announced Entry into CPU Market Forces
Photo: Intel Corporation

The announcement has negatively affected the shares of Intel (INTC) as they closed yesterday’s trading session down 4.18%.

American multinational technology company NVIDIA Corporation (NASDAQ: NVDA) has announced its grand entry into the Central Processing Unit (CPU) market through ‘Grace’, its own server central processor. As reported by CNBC, Grace is built based on ARM technology and will remarkably provide the right competition for its rival, Intel Corporation (NASDAQ: INTC) who notably controls as much as 90% of the data center CPU market.

Nvidia is best known for its Graphics Processing Unit (GPU) technology which has already found wide uses in data centers. The foray into CPU production is based on the company’s confidence in its tech to support the voluminous data required to power Artificial Intelligence (AI) systems as well as high-performance computing (HPC) applications.

“Leading-edge AI and data science are pushing today’s computer architecture beyond its limits – processing unthinkable amounts of data,” Nvidia CEO Jensen Huang said in a statement. “Using licensed Arm IP, NVIDIA has designed Grace as a CPU specifically for giant-scale AI and HPC.”

Impact on Intel (INTC) Shares

Huang also described the firm as a three-chip company now focused on GPUs, CPUs, and Data Processing Units (DPUs) respectively.

“Coupled with the GPU and DPU, Grace gives us the third foundational technology for computing, and the ability to re-architect the data center to advance AI. NVIDIA is now a three-chip company,” he noted.

Intel’s dominance in the data center processors market has made its Data Center Group (DCG) one of its most profitable business units. The DCG generated $10.6 billion in profits in the 2020 fiscal year. The incoming competition is a threat to this profit flow.

While NVDA ended Monday’s session with a 5.62% gain to $608.36, the announcement has negatively weighed in on the shares of Intel (INTC) as they closed yesterday’s trading session down 4.18% to $65.40.

Nvidia’s CPU Products Already Have a Market

Prior to unveiling the unique capabilities of Grace, Nvidia’s CPU product appear to have a ready market. Per the CNBC report, the company affirmed that three researchers including the United States Department of Energy’s Los Alamos National Laboratory have planned to build some supercomputers using the Grace chips.

The uniqueness of the Grace is also bound to endear it to more clients as the need for high-performing chips in data centers will be its strongest advantage. The Grace chips can provide as much as 10-time performance gains on servers for complex AI and HPC tasks. With the ARM’s technology upon which it is built, it will also consume relatively less energy in doing this amount of work.

Future development of high-powered CPU chips using ARM’s technology is also likely as the company is in talks to acquire Arm Holdings, a Cambridge-based tech firm from SoftBank Group Corp (OTCMKTS: SFTBY) in a deal price worth $40 billion. If successful, Nvidia will advance its reach to the production of chips used in powering the majority of smartphones in the market today.

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