Will AMD’s Naples Server CPU Challenge Intel’s Server CPUs?

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AMD to enter the high-end server CPU market

In the last article, we learned that Advanced Micro Devices (AMD) is looking to expand its semi-custom business beyond gaming and into adjacent markets. These markets could be automotive, smartphone, AI (artificial intelligence), or embedded devices. 

While the mystery has yet to unfold, AMD is making inroads in the high-end server processor markets with its new Naples CPU (central processing unit). The company has spent significantly on developing this CPU, which it claims can compete with Intel’s (INTC) Xeon server processors.

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Specifications of Naples server CPUs

AMD’s Zen-based Naples server CPUs are expected to compete with Intel’s Purley platform based on its Skylake architecture. On AMD’s 1Q17 earnings call, CEO Lisa Su stated that Naples would be different from Intel’s Purley on three grounds: its number of cores, its memory bandwidth, and its input/output (or I/O) capacity.

AMD claims that Naples will have 32 cores compared to Purley’s 28 cores along with 60% more I/O capacity and 122% more memory bandwidth than Purley. 

Su claims that Naples will be ideal for cloud, high-performance computing, and big data workloads that require higher I/O capacity and memory bandwidth.

Can Naples compete with Purley?

Naples may perform better than Intel’s Purley in some workloads, but it’s unlikely to beat Intel in general. Intel has been the market leader in server processors for years. Many companies such as AMD and IBM (IBM) have struggled and failed to gain a meaningful market share. The closest competition for Intel has been AMD, as it also designs x86 chips. Other ARM-based processors haven’t been competitive enough.

Now, AMD looks to challenge behemoth Intel in the server space. The adoption of Naples may take some time due to long design-win cycles and the necessity of convincing customers to switch from Xeon to Naples. 

For these reasons, Naples is unlikely to deliver any meaningful revenue before 2018. It’s difficult to predict whether AMD will gain a meaningful share of the server processor market as a result of Naples’ performance.

Intel expects slow growth in the server CPU market

Intel expects its server CPU sales to grow at a CAGR (compound annual growth rate) of just 6% through 2021. This lower estimate may not mean that the market is slowing. Instead, the competition could be increasing, or the market could be shifting to alternatives such as GPUs (graphics processing unit), reducing the demand for CPUs.

AMD is the only company that offers both CPUs and GPUs. It’s leveraging its portfolio and delivering a complete deep-learning integrated solution with its Naples CPUs and its Vega GPUs.

All factors point to AMD’s growth, but this growth has likely already been factored in to its stock price. Next, we’ll see what events could bring fresh growth for AMD.

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