Why Nvidia's deal with Meta is an 'Intel killer,' according to this analyst

By Britney Nguyen

The use of Nvidia CPUs could signal a significant shift toward Arm-based chips in the data center

Meta's new deal with Nvidia suggests stiffer competition for Intel in the CPU market.

Nvidia's expanded partnership with Meta Platforms could be a bad omen for Intel.

Nvidia (NVDA) announced on Tuesday that it will deploy more of its Arm-based Grace central processing units in Meta's (META) data centers for what the chip maker called "the first large-scale Nvidia Grace-only deployment." The CPUs are used for tasks such as running applications and agents.

To Richard Windsor, founder of research firm Radio Free Mobile, the expanded partnership is "a sign that the move towards Arm in the data center is accelerating." For Intel, whose x86 CPU architecture competes with Arm's (ARM) eponymous architecture, that "is more terrible news," he said in a Wednesday note, in which he called the deal an "Intel killer."

Intel has long dominated the server chip market, Windsor said, while Arm-based chips "have often floundered" due to incompatibility with legacy software systems in data centers. That's likely becoming a thing of the past, Windsor noted, judging by Nvidia's Meta deal.

Nvidia, best known for its graphics processing units, has been seeing CPU traction as it pushes a full system of offerings for the data center. The server chip market has seen renewed momentum in general, as CPUs are essential to running data centers.

See more: Nvidia's new Meta deal may not be great news for these other tech stocks

Nvidia said its CPUs offer an improvement in performance per watt for Meta's data centers, which Windsor noted is becoming more crucial to the data-center buildout as worries mount over electrical-grid capacity.

As Meta and other hyperscalers seek ways to address the electricity bottleneck, Windsor said the focus has also been on optimizing chips, and that's where Arm-based processors have an upper hand compared with Intel's x86.

The move to Arm-based CPUs also represents an opportunity for more server-chip makers to take part in Meta's plan to spend up to $135 billion this year, Windsor said, adding that he sees Meta using custom silicon as well as Nvidia's "off-the-shelf" systems.

Therefore, Windsor said he expects to see more deals over the next few months with chip makers that design Arm-based data-center processors, and with companies that design and deploy custom-made chips for inference, or the process of running AI models.

"The real loser here is Intel, as it is now open season on all of its main product lines," Windsor said, pointing to both its personal-computer and data-center chips.

Read on: Why AMD's stock is charging higher as Intel's sinks

Intel said on its earnings call last month that it has had to shift capacity away from its PC business to meet overwhelming AI-fueled demand in its data-center segment.

To Windsor, the final nail in Intel's coffin could come from its main CPU rival, Advanced Micro Devices (AMD), if the chip maker launches an Arm-based CPU for both PCs and servers.

After Intel highlighted its supply crunch in late January, Mizuho trading-desk analyst Jordan Klein said he thought AMD was in a better spot to meet customer demand for data-center chips because of the strength of its partnership with Taiwan Semiconductor Manufacturing Company (TW:2330). Klein also said AMD's server CPUs are preferred by hyperscalers over Intel's.

-Britney Nguyen

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02-18-26 1319ET