The data center chip market is anticipated to undergo a substantial growth in the coming decade, surpassing a Compound Annual Growth Rate (CAGR) of 8.1% from 2022 to 2032.
According to a report from DataHorizzon Research, the burgeoning market was valued at USD $11.1 billion in 2022 and is predicted to reach an estimated size of USD 23.8 billion by 2032.
The industry, responsible for the core of data processing and computing operations, is being propelled by a rapid surge in data generation and the pressing need for efficient data processing. There's a rising demand for robust and efficient data center chips that are adept in managing the ever-increasing influx of data from different sources which includes IoT devices, social media platforms, e-commerce transactions, and cloud-based applications. Such chips play an instrumental role in improving data processing speed, optimising energy consumption, and delivering high performance for effective workload management.
With projections that 51% of IT spending will transition to cloud solutions by 2025, the demand for data center chips designed to support cloud computing requirements is ballooning. The advantages offered by cloud-based services such as accessibility, scalability, and cost-effectiveness are inducements for the shift towards cloud solutions. High-performance computing, virtual machine management, and data storage functionalities are vital in supporting cloud computing which consequently highlight the significance of well-suited data center chips.
Artificial Intelligence (AI) and Machine Learning (ML) continue to infiltrate various sectors like healthcare, finance, automotive, and e-commerce. The necessity for advanced algorithms and formidable computational abilities to process and analyse large datasets efficiently is indisputable. As a result, there's been a significant increase in demand for data center chips equipped with deep learning capabilities and neural network accelerators, to enable efficient and rapid execution of workloads.
The data center chip market has been segmented into chip type, data center size, vertical, and geography. The GPU segment takes the lead in the revenue share, attributed to its parallel processing architecture. However, the ASIC segment is also projected to see significant growth, while the BFSI sector leads the market growth in terms of verticals.
North America, driven by the United States, is the dominant player in the data center chip market. Attributable to a mature and technologically advanced data center infrastructure, and the presence of major technology companies and cloud service providers, the region spearheads the global market. Some key players include Achronix Semiconductor Corporation, Advanced Micro Devices Inc., Arm Limited, Broadcom Inc., Fujitsu Limited, and others.
Recent developments reflect a positive trend in the sector. For instance, NVIDIA and Acer have collaborated on developing Predator Connect software that prioritises cloud gaming traffic to improve the streaming experience. In another instance, Marvell Technology reported a hike in revenue due to AI demand, forecasting the AI revenue to double in fiscal 2024 with an expectation of further increase.