Nvidia's Latest Move Spells Trouble for AMD and Intel Investors

Nvidia (NASDAQ: NVDA) absolutely dominates the market for advanced graphics processing units (GPUs) used for artificial intelligence (AI) applications. When it comes to the ultra-computationally intensive processing required to train AI models, the company is often projected to command more than 90% of the market.

Even for less computationally intensive inference applications used to run AI software, estimates of the company's market share in the category often range between 60% and 75%. Notably, Nvidia hasn't had much to offer when it comes to central processing units (CPUs) used to run some AI inference applications, and it's only just starting to compete in the broader server CPU market that is currently dominated by Intel (NASDAQ: INTC) and Advanced Micro Devices (NASDAQ: AMD). On the other hand, Nvidia looks poised to make big inroads in the server CPU market -- and it could pose significant challenges for the current category leaders.

Image source: Getty Images.

Nvidia could be poised to upend the CPU market

Due to GPUs' greater role in AI and data-center processing, and stronger margins in the category, Nvidia has been largely content to ignore the CPU market over the last decade. That's changing rapidly, however. More AI processing is being shifted to CPUs, while growth in the total number of operational and trained applications has increased the company's incentives to become a top player in the category.

The AI hardware leader is making moves to become a more diversified provider of compute technologies and services, and it looks poised for a rapid expansion in the server CPU market. In its fiscal Q2 2027 report, Nvidia revealed that its Grace family of CPUs had already generated $5 billion in sales over the trailing 12-month period, and that's almost certainly just the beginning of the company's scaling in the category.

Nvidia projects that its data center CPU revenue will more than double from this fiscal year to the next fiscal year, with the rollout of its next-generation family of processors playing a huge role in the growth. Along with its top-of-the-line Vera Rubin GPUs, the company is rolling out its Vera family of CPUs.

Nvidia has entered full production of its Vera CPUs, and it stands to see strong growth in the processing category as it pairs the hardware with its Vera Rubin GPUs and sells the tech as a stand-alone product. With its control of the high-end GPU market, the company has the advantage of delivering CPUs that are optimized for integrated performance.

Along those lines, Nvidia says its Vera hardware delivers performance and efficiency that significantly exceed those of any other data center CPU in key areas. These strengths could allow it to quickly win market share from Intel and AMD.

Keith Noonan has positions in Intel. The Motley Fool has positions in and recommends Advanced Micro Devices, Intel, and Nvidia. The Motley Fool has a disclosure policy.