Oracle's Chip Procurement: NVIDIA, AMD, Ampere | Intel's Impact

Oracle Founder and Chairman, Larry Ellison, recently announced plans to procure billions of dollars' worth of GPUs and server CPUs from leading chip manufacturers. The companies in question include NVIDIA, AMD (Advanced Micro Devices), and Ampere Computing. Notably absent from Ellison's list is Intel, which has long dominated the server market with its x86 architecture.

According to reports, Oracle intends to purchase GPUs worth billions of dollars from NVIDIA, while allocating approximately triple that amount to acquire CPUs from both AMD and Ampere.

Industry experts predict that if Oracle spends $2 billion on NVIDIA GPUs, they could potentially spend up to $6 billion on CPUs from Ampere and AMD. This ambitious spending spree would amount to a total capital expenditure of $8 billion. To put this into perspective, it is almost equivalent to Oracle's entire capital expenditure for the fiscal year ending in May 2023, nearly double the amount spent in FY2022, and a staggering four times that of FY2021.

In terms of Oracle's overall revenue, the projected $8.7 billion capital expenditure for FY2023 represents approximately 17% of their annual earnings. This figure surpasses the 10.6% share recorded in FY2022.

Ampere Computing, a startup founded by former Intel President Renee James, specializes in developing ARM architecture-based server chips. Oracle has displayed its confidence in the company by investing over $800 million.

Similarly, AMD focuses on developing server chips that leverage ARM architecture and feature a substantial number of physical cores. Their latest flagship server processor, the EPYC 9754 Bergamo CPU, boasts an impressive 128 cores and 256 threads.

It is speculated that Oracle may secure a significant quantity of AMD's Instinct MI300 accelerators. These cutting-edge products integrate CPUs, GPUs, and ample high-bandwidth memory, enhancing performance and versatility.

Industry analysts believe that Oracle's procurement from NVIDIA will guarantee access to tens of thousands of dedicated Tensor Core GPUs. With an estimated cost of around $40,000 per unit or potentially even lower, this strategic move will enable Oracle to seamlessly incorporate generative artificial intelligence (Generative AI) capabilities into their cloud services. The aim is to offer functionality similar to that found on Microsoft Azure or Google Cloud.

Interestingly, Oracle's shift away from x86 architecture towards ARM-based chips mirrors a broader trend in the industry. According to DIGITIMES Research, AMD and ARM have been aggressively gaining ground in the server CPU market, resulting in a rapid decline in Intel's market share. Competing brands have caught up and, in some cases, surpassed the performance and solutions offered by the market leader. Consequently, changes in market share are expected to unfold in the near future.

Projections indicate that Intel's share of the server CPU market will decrease from 86.6% in 2020 to 70.9% in 2023. In contrast, AMD's market share is set to double, rising from 10.1% in 2020 to 20.5% in 2023. Similarly, ARM is expected to experience growth, increasing its market share from 2.6% in 2020 to 8.1% in 2023.