The server CPU market has long been dominated by Intel (INTC 2.22%) and AMD (AMD 3.34%). Both companies make chips based on the x86 architecture. While there are other types of CPUs used for specialized purposes -- think IBM mainframes -- x86 reigns supreme in the data center. Software is compiled and optimized for x86 chips, which creates significant switching costs.

Qualcomm (QCOM 3.56%) has already tried and failed once to bring chips based on the Arm architecture, which dominates the smartphone market, to the server market. Qualcomm's Centriq server CPUs failed to gain any traction when they were launched in late 2017, leading the company to greatly scale back its efforts. Switching to Arm-based chips or mixing-and-matching architectures just wasn't worth the effort for any major server CPU customer.

Trying again

Qualcomm launched its first Arm-based PC CPUs last year, and although they haven't exactly been a smash hit, partly because of compatibility problems, Arm-based PC are likely to be here to stay. Qualcomm is now seemingly looking to re-enter the server CPU market with new chips.

According to a LinkedIn post, Intel veteran and a chief architect of the Xeon server processor family Sailesh Kottapalli is joining Qualcomm after nearly three decades at Intel. In December, Qualcomm disclosed in a job posting that its data center team was working on server products for data center applications. Kottapalli is expected to lead that effort.

While Qualcomm's PC chips have issues running certain types of applications, particularly games, using emulation, they provide solid performance and efficiency. Qualcomm can build on that work to go after the data center market.

It might be different this time

Back in 2018, Qualcomm had little chance of success with its Centriq server CPUs. There was too much inertia behind x86, and the software ecosystem was centered around the dominant architecture.

Qualcomm might have better luck this time around thanks to artificial intelligence. Tech giants like Microsoft are spending mountains of money building brand new AI datacenters, and some are even designing their own Arm-based CPUs. The software stack is still evolving, and with Microsoft, Amazon, and others now getting behind Arm-based server CPUs, there's a lot more momentum in 2025 than there was in 2018.

While the environment is more welcoming for Qualcomm, the company will face competition from potential customers' in-house chip design efforts as well as any other company that jumps into the market. Nvidia already sells its Grace family of data center CPUs based on the Arm architecture, and others could follow as Arm gains more traction.

Don't count out Intel and AMD

While Intel and AMD will face more competition if Qualcomm reenters the server CPU market, both companies have solid product lineups that will be tough to beat. Intel improved its competitive positioning last year with its powerful Granite Rapids chips and efficiency-focused Sierra Forest chips, and this year it plans to use its cutting-edge Intel 18A manufacturing process for Clearwater Forest.

Meanwhile, AMD officially launched its Turin family of server CPUs in October, which goes up to 192 cores. Included in the lineup is a CPU specially designed to act as the host node CPU for a cluster of AI accelerators. AMD's last-generation server CPUs were a big hit, and the company will look to build on that progress.

Qualcomm appears to be gearing up to try again in the server CPU market. This time should go better than last time as the environment is far more conducive to Arm-based CPUs, but competition will be fierce.