Over more than three decades, British company Arm Holdings has built a remarkable position for itself. It designed chips but never physically manufactured them. It licensed its architectures to Apple, Nvidia, Amazon, Google, Qualcomm, and dozens of others. It collected licensing fees and stayed out of direct competition. It was called the "Switzerland of the chip industry." But that is now changing.
CEO Rene Haas unveiled the company's first physical chip of its own at an event in San Francisco: the Arm AGI CPU. It marks a fundamental shift in how Arm operates and makes money.
What makes this chip stand out?
The AGI CPU was created for one specific purpose: to power so-called agentic artificial intelligence. These are systems that do not need a person at every step; they plan, execute tasks, and chain them together on their own. This is exactly the type of AI that is beginning to consume enormous amounts of computing power, and processors such as those from Intel or AMD can handle it, but not always efficiently.
Arm has opted for a different approach. A single air-cooled rack can accommodate up to 64 AGI CPUs with approximately 8,700 cores. Mohamed Awad, head of Arm's cloud AI division, described it as follows: "You get twice the performance per watt compared to an x86 rack. The same performance in the same space, with the same power consumption." For data centers, where power capacity is scarce and expensive, that is no small matter. The chip is built using TSMC's 3-nanometer process and consists of two separate pieces of silicon that operate as a single unit. Test samples are complete and working as planned. Mass production is expected to begin in the second half of 2026.
Arm built a dedicated laboratory in Austin, Texas. It cost $71 million, took 18 months to build, and the team working there has grown to more than a thousand people.
Meta as the first customer and co-developer
The biggest name on the customer list is Meta, and it is not merely waiting in line to buy: Meta has been actively involved in developing the chip since 2023. Paul Saab, a software engineer at Meta, put it clearly: they wanted a drop-in replacement for existing servers that would be transparent to developers, while also wanting the chip to be available to the entire world, not just to them.
After all, Meta is not a chip company that sells products. It is building data centers worth hundreds of billions and needs flexibility in its supply chain. This year, it plans to spend $115 billion to $135 billion on capital expenditures. If Arm captured even just 5% of that, analyst Patrick Moorhead said it would be a "game changer" for its revenue.
Interestingly, Meta struggled considerably last year. Its Llama 4 model was not exactly welcomed enthusiastically by developers. The company fell behind and had to catch up. It bought heavily from both Nvidia and AMD, and now it is adding Arm as well. Diversification at any cost.
There is no shortage of interest in the chip
Meta is not alone. AGI CPU customers include OpenAI, Cloudflare, F5, SAP, SK Telecom, Cerebras, Positron, and Rebellions. Arm is also collaborating with Lenovo and Quanta Computer on complete server systems.
One notable absence? Qualcomm. The company, which last year celebrated a "complete victory" in its legal dispute with Arm over licensing terms, was missing from the launch congratulations. That speaks volumes. By contrast, congratulations came from Nvidia's Jensen Huang, Google, Amazon, Microsoft, Oracle, Broadcom, Micron, Samsung, and SK Hynix. Around fifty partners expressed their support even before the launch.
Haas did not mince words with investors. According to his forecast, the AGI CPU is expected to generate approximately $15 billion in annual revenue within five years. Arm's total revenue should reach $25 billion annually, with earnings per share of $9. The licensing business is expected to double in size over the same period. For comparison: Wall Street expected Arm to report earnings of $1.75 per share and revenue of just under $5 billion for the current fiscal year. The leap to $25 billion is therefore ambitious. The stock rose 6.5% in after-hours trading following the announcement.
Arm is targeting an AI processor market that analysts estimate to be worth more than a trillion dollars. Until now, it had no physical presence in that market at all.
Impact on its customers
For years, Arm operated as a neutral supplier of architectures. Apple, Nvidia, Amazon, and Google all built on its designs and paid for the privilege. Now Arm is beginning to manufacture its own chip and sell it directly to data centers.
Will Arm become a competitor to its existing customers? Awad explains that the AGI CPU targets companies that cannot afford to develop their own processor because doing so requires thousands of engineers and a budget of half a billion dollars. But Meta and OpenAI do not fit that description, and yet they are buying it.
Rene Haas knows it. The expression on his face during a photo shoot for Wired magazine said plenty. "People will say that Arm's CEO sleeps on the job," he joked.
Sources: cnbc.com and theverge.com
