Microsoft's Reported Plans to Design Its Own CPUs: 5 Thoughts

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While Microsoft's reported CPU efforts are bad news for Intel, the selloff seen in the chip giant's stock since Friday is arguably excessive.
Two years after Amazon.com (AMZN) - Get Report unveiled an Arm-architecture server CPU to deploy within AWS data centers, it looks like Microsoft (MSFT) - Get Report is working on something similar for Azure data centers.

Bloomberg reported on Friday afternoon that the software giant is both developing an Arm CPU for use in its own data centers and "exploring using another chip that would power some of its Surface line of personal computers." Conceivably, the server CPU could be used to both power cloud computing instances provided to Azure clients, and to run some of the many Microsoft apps and services delivered via Azure data centers.

The news has led Intel's (INTC) - Get Report already-battered stock to drop more than 9% from Thursday's close. Intel shares are now down 24% on the year.

Here are a few thoughts about Bloomberg's report:

1. It's in Microsoft's Interests to Counter Amazon's Arm Server CPU Efforts

Intel and AMD's (AMD) - Get Report x86-architecture server CPUs are still a better choice than Arm CPUs for many workloads, and for now claim a much broader software ecosystem. But as Nvidia (NVDA) - Get Report was eager to stress when it announced its deal to buy Arm, Arm server CPUs have a fair amount 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 (though not all) workloads. And that, together with aggressive pricing, has allowed AWS to land some high-profile clients for Graviton2-powered cloud computing instances.

It's clearly in Microsoft's interests to offer Azure clients an alternative to Graviton-powered instances. And along the way, it might also reap some cost savings by using its Arm CPUs to handle certain internal workloads.

2. It's Far from Clear Whether Microsoft Will -- or Should -- Develop an…
Eric Jhonsa
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