Harsh Chauhan, The Motley Fool
6 min read
Nvidia (NASDAQ:NVDA) reported fantastic results for the second quarter of fiscal 2027 (which ended July 26), with the company’s phenomenal revenue and earnings growth suggesting that it continues to dominate the lucrative artificial intelligence (AI) chip market.
The 106% year-over-year spike in Nvidia’s revenue last quarter to $96.2 billion was fueled by a tremendous increase in its data center revenue. The company reported a 117% year-over-year increase in data center revenue last quarter to $89 billion, driven by the strong demand for its graphics processing units (GPUs) from hyperscalers, AI labs, and neocloud companies.
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However, Nvidia also pointed out that it will make a big dent in the server central processing unit (CPU) market, an area dominated by Intel (NASDAQ:INTC) and Advanced Micro Devices (NASDAQ:AMD). Let’s take a closer look at what Nvidia said about its server CPU prospects, and why its growing influence in this area doesn’t bode well for AMD and Intel.
Image source: Nvidia.
Nvidia’s server CPU business is growing at an incredible pace
Nvidia introduced its Grace server CPU in 2021. Management noted on the latest earnings call that the trailing-twelve-month revenue from Grace CPUs exceeds $5 billion. However, it’s worth noting that Nvidia sells the Grace CPU as part of its server systems, which also include other chips. But the company is now looking to make a bigger splash in server CPUs. Nvidia is now offering its Vera server CPU as a stand-alone product.
Nvidia CFO Colette Kress remarked on the earnings call that the Vera CPU will expand the company’s total addressable market (TAM) and could gain impressive traction among customers given its faster performance compared to other data center CPUs. Kress added:
We expect Vera to be deployed by every major hyperscaler, neocloud, AI lab, and system OEM, with shipments already underway to our lead partners, including OCI, SpaceXAI, and starting this quarter, AWS. We continue to see demand for approximately $20 billion in total server CPUs.
The $20 billion Vera server CPU revenue estimate for 2026 is quite impressive compared to the revenue Nvidia has generated from sales of its Grace CPUs. What’s more, Nvidia believes that its server CPU revenue will more than double in fiscal 2028. AMD and Intel, which are the dominant players in the server CPU market, are growing at a relatively slower pace.
