Arm challenges Intel and AMD as AI agents drive CPU demand

AI agents are increasing demand for server CPUs, which coordinate the hardware and software needed to execute complex tasks. AMD expects the server CPU market to grow at an annual rate of 50% through 2030, reaching $220 billion in annual revenue. Intel and AMD are already benefiting, while Arm is positioned to compete through its chip architecture and its own server processors.

Arm licenses intellectual property to chipmakers such as Nvidia and collects royalties on chips using its architecture. Arm-based server CPUs deliver 30% to 60% higher energy efficiency than x86 chips, supporting their appeal for agentic workloads. IDC reported that Arm-based server platforms generated $53 billion in revenue in the first quarter of 2026, compared with $34.6 billion for x86 platforms.

Arm has also started making its own server CPU for agentic AI and inference. It expects more than $2 billion in revenue from those processors over the next couple of fiscal years, following new customer additions. Counterpoint Research forecasts that Arm-based processors will capture 90% of the custom server CPU market by 2029, a narrower category than the overall server market.

The growth outlook comes with valuation risk. Arm trades at 235 times earnings, with a forward earnings multiple of 103. Those multiples leave investors paying a substantial premium for anticipated expansion.