Nvidia Just Delivered a Massive Warning to AMD and Intel Stock Investors
Nvidia (NVDA +1.80%) reported fantastic results for the second quarter of fiscal 2027 (which ended July 26), with the company’s phenomenal revenue and earnings growth suggesting that it continues to dominate the lucrative artificial intelligence (AI) chip market.
The 106% year-over-year spike in Nvidia’s revenue last quarter to $96.2 billion was fueled by a tremendous increase in its data center revenue. The company reported a 117% year-over-year increase in data center revenue last quarter to $89 billion, driven by the strong demand for its graphics processing units (GPUs) from hyperscalers, AI labs, and neocloud companies.
However, Nvidia also pointed out that it will make a big dent in the server central processing unit (CPU) market, an area dominated by Intel (INTC +1.80%) and Advanced Micro Devices (AMD -0.20%). Let’s take a closer look at what Nvidia said about its server CPU prospects, and why its growing influence in this area doesn’t bode well for AMD and Intel.
Image source: Nvidia.
Nvidia’s server CPU business is growing at an incredible pace
Nvidia introduced its Grace server CPU in 2021. Management noted on the latest earnings call that the trailing-twelve-month revenue from Grace CPUs exceeds $5 billion. However, it’s worth noting that Nvidia sells the Grace CPU as part of its server systems, which also include other chips. But the company is now looking to make a bigger splash in server CPUs. Nvidia is now offering its Vera server CPU as a stand-alone product.
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Nvidia CFO Colette Kress remarked on the earnings call that the Vera CPU will expand the company’s total addressable market (TAM) and could gain impressive traction among customers given its faster performance compared to other data center CPUs. Kress added:
We expect Vera to be deployed by every major hyperscaler, neocloud, AI lab, and system OEM, with shipments already underway to our lead partners, including OCI, SpaceXAI, and starting this quarter, AWS. We continue to see demand for approximately $20 billion in total server CPUs.
The $20 billion Vera server CPU revenue estimate for 2026 is quite impressive compared to the revenue Nvidia has generated from sales of its Grace CPUs. What’s more, Nvidia believes that its server CPU revenue will more than double in fiscal 2028. AMD and Intel, which are the dominant players in the server CPU market, are growing at a relatively slower pace.
AMD’s data center segment, which includes sales of both data center GPUs and server CPUs, saw a 107% year-over-year increase in revenue in Q2 to $6.7 billion. It has sold data center chips worth $12.5 billion in the first six months of 2026, translating into an annual run rate of $25 billion.
Intel, on the other hand, reported a 59% jump in its data center and AI (DCAI) segment revenue in Q2 to $6.3 billion. Its DCAI revenue stands at $11.4 billion for the first six months of 2026, translating into an annual run rate of almost $23 billion. Investors should note that both Intel and AMD include sales of other AI chips, such as custom AI processors and GPUs, into their data center segment. They don’t single out their server CPU revenue.
However, Nvidia’s revenue guidance for fiscal 2027 and fiscal 2028 suggests that its server CPU business is growing at a faster pace than what AMD and Intel have been clocking. In fact, Nvidia’s overall data center business growth exceeded the growth rates reported by AMD and Intel in their data center segments last quarter. Nvidia managed this feat despite having a significantly higher revenue base in data centers.
The significant improvement the company anticipates in server CPU sales next year suggests it could continue to eat AMD’s and Intel’s lunch. Another important point worth noting is that Nvidia’s Vera server CPU has been custom-designed using Arm Holdings‘ v9.2-A architecture. Intel and AMD, meanwhile, use the x86 architecture to design their server CPUs.
Tom’s Hardware reports that Arm-based server CPUs now account for 45% of the data center market’s revenue. Arm-based systems are experiencing solid demand due to their higher energy efficiency and performance for inference and agentic AI workloads. This explains why Arm-based server CPUs are anticipated to capture 90% of the server CPU market by 2029, according to Counterpoint Research.
This is great news for Nvidia investors, as the server CPU market is expected to be worth $220 billion in 2030, according to AMD.
Nvidia remains the best AI chip stock to buy
While Nvidia’s aggressive progress in the server CPU market doesn’t bode well for Intel and AMD, it is indeed good news for investors holding shares of the AI pioneer. After all, Nvidia is now in a more formidable position in AI chips by branching out into server CPUs.
Its entry into this lucrative market is probably one of the reasons why analysts are now anticipating a bigger increase in earnings.
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Moreover, Nvidia remains significantly cheaper than both AMD and Intel.
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All this explains why investors looking to make the most of the fast-growing AI chip market will do well to continue holding Nvidia stock in their portfolios, as its stronger growth prospects and attractive valuation will pave the way for impressive upside.
