Google Powers Up Cloud Competition with Cutting-Edge Arm-Based Server Chips

Google's (NASDAQ: GOOG) share price has increased by 0.61% in the pre-market, adding to the 1.28% gain seen in yesterday's session on the back of news. An ambitious venture to launch its own custom-built Arm-based server chips could be set to hit the market as early as this year.

This strategic move to intensifies the already fierce competition within the cloud computing market. This step, revealed during the Google Cloud Next conference in Las Vegas, aligns Google with industry counterparts that have already embraced Arm technology in their infrastructure.

Google, which held 7.5% of the cloud infrastructure market in 2022, is ramping up its efforts to close the gap with frontrunners Amazon and Microsoft, who combined commanded a dominant share of around 62%. Amazon Web Services (AWS, NASDAQ: AMZN) pioneered this shift with the introduction of its Graviton Arm chip back in 2018, setting off a chain reaction with other tech giants, including Microsoft (NASDAQ:MSFT), following suit.

Significantly, Google's foray into Arm-based server computers marks more than a bid to capture market share; it embodies a transition in their internal operations. Google plans to migrate from its current Arm-based servers, which support vital services such as YouTube advertising and databases, to cutting-edge cloud-based Axion instances. These will not be sold directly to consumers, but can be used through Google infrastructure.

The unveiling of Axion stands as a testament to Google's commitment to spearheading progression in the cloud domain. The company's projections are assertive, with Axion anticipated to outclass other Arm-based virtual machines by 30% and eclipse the performance of equivalent x86-based VMs by a substantial 50%.

Moreover, Google is not just selling performance but also sustainability. The pivot to Arm architecture, exemplified by chips like Axion, presents a promising avenue to achieving lower carbon emissions for particular workloads. The energy efficiency benefits are hard to overlook, with projected figures suggesting a 60% improvement over x86 models. This leap in efficiency resonates with a growing eco-conscious consumer base and legislative pressures across the globe for greener technologies.

Arm chips, ever common in the mobile industry due to their simplistic instruction set, are well-equipped to accelerate applications, fostering rapid adoption. This characteristic is a boon for a cloud-intensive landscape where agility and speed are invaluable.

This strategic move aligns with the broader industry trajectory towards custom silicon, which increasingly serves as a battlefield for differentiation amongst cloud providers. With Alphabet shares now back at all time high levels, markets will want to see more to push the company ever higher.