Investing.com -- According to Reuters, Arm Holdings (NASDAQ:ARM), a UK-based tech firm, has predicted a considerable increase in its global market share for data center central processing units (CPUs) by the end of 2025. The company, which held approximately 15% of the market share in 2024, expects this figure to surge to 50% by the end of 2025. This anticipated growth is attributed to the rising demand for AI applications.

Arm's CPUs are critical components in AI computing systems. They serve as the host chip, managing the workflow of other AI chips. This role is evident in Nvidia (NASDAQ:NVDA)'s advanced AI systems, which use an Arm-based chip called Grace along with its Blackwell chips.

Mohamed Awad, Arm's infrastructure chief, emphasized to Reuters that Arm's technology often uses less power than its rivals like Intel (NASDAQ:INTC) and Advanced Micro Devices (NASDAQ:AMD). This advantage has led to its chips becoming increasingly popular among cloud computing providers, especially as AI data centers require substantial electrical power.

Major tech companies have already adopted Arm's technology for their data center operations. Amazon.com (NASDAQ:AMZN) has designed in-house data center CPUs based on Arm's technology, which powered over half of its chip capacity expansion in the past two years. Google (NASDAQ:GOOGL) and Microsoft (NASDAQ:MSFT) have also developed Arm-based data center chips, joining Amazon in the shift towards Arm's architecture.

Awad also noted that data center chips tend to use more of Arm's intellectual property, which results in higher overall royalty rates for the company compared to chips used in simpler devices.

Arm Holdings, largely owned by SoftBank (TYO:9984) Group, does not manufacture chips. Instead, it licenses its intellectual property to other companies. These businesses, including industry leaders like Apple (NASDAQ:AAPL) and Nvidia, use Arm's technology to design their own chips for various devices. Arm's revenue model is based on licensing fees and royalty payments for each chip sold using its technology.

Arm's expected rise in market share comes after nearly two decades of struggles in the data center market. However, according to Awad, the situation is changing, with software now being developed with Arm as a primary consideration.

The company's technology powers over 99% of the world's smartphones, giving it a formidable position in the mobile computing market. Arm's prediction emphasizes that the company is positioning itself as a key player in the burgeoning AI and data center markets, leveraging its energy-efficient designs to address the growing demand for high-performance, low-power computing solutions.

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