AI demand set to drive processor market boom

The microprocessor IC market is set to grow rapidly driven by demand for silicon to support generative AI, but market leader Intel is under pressure on multiple fronts, according to Yole Group.

The processor market encompasses various technologies, including CPUs, GPUs, APUs, SoC FPGAs, AI ASICs, and DPUs, each with distinct market trends, revenue, and volume forecasts.

The processor market was worth US$220 million in 2023, accounting for 42 percent of the overall chip market. Processor sales are expected to consistently grow faster that the overall market with 14 percent compound annual growth rate over the period 2023 to 2029. The data center segment accounted for 38 percent of the total market in 2023, ahead of the mobile segment.

The processor market sales ranking in 2023 was Intel first followed by Nvidia, AMD, Apple and Qualcomm in that order, the market researcher asserts.

The continuing rise of the GPU

Application processors (APUs), CPUs, and GPUs currently lead the market in this order. However, GPUs are projected to surpass other segments due to their critical role in AI-driven workloads. Yole Group projects a 25 percent CAGR for GPUs from 2023 to 2029, compared to 5 percent for CPUs and 8 percent for APUs. Therefore, the GPU segment is projected to become two times bigger than its CPU counterpart by 2029.

Hugo Antoine a market analyst at Yole, said: “Intel and Nvidia mainly target data centers and PCs. For now, Nvidia isn’t directly competing in Intel’s market. Nvidia handles GPUs, Intel takes care of CPUs. But Nvidia hasn’t hidden its plans to replace x86 data center CPUs with its Grace CPU. So, the next few years could be tough for Intel, especially with growing competition in laptop processors from AMD, Qualcomm, and Apple.”

Another analyst at Yole, Adrien Sanchez, said: “Large investments in AI hardware for data center applications have propelled fast growth in the telecom & infrastructure market segment. At Yole Group, we point out a 22 percent CAGR between 2023 and 2029 for this market. The segment is projected to overtake mobile & consumer in 2024. And we think it will account for more than 60 percent of processor revenues in 2029.”

At present Intel and AMD lead in CPUs and Nvidia and AMD lead on GPUs. However, the rise of generative AI, initiated by the release of ChatGPT in 2022, led to a surge of data center spending in 2023, directly impacting the processor market segment. These trends will propel continuous market growth throughout the next five years, Yole said.