Amazon is experiencing high demand for its Arm-based Graviton chips, with Arm reporting a doubling of data center royalty revenue in the past year. The increasing need for AI compute is expected to benefit Arm. Amazon’s stock fell post-earnings, but the growth of custom chips like Graviton and Trainium is promising, with a revenue run rate exceeding $10 billion annually.

Graviton’s success is evident with Amazon adding significant EC2 core computing capacity daily, majority using Graviton. The performance of Graviton surpasses x86 processors by over 40%, driving Arm’s growth with over $1 billion in quarterly revenue. Arm’s data center royalty revenue doubled, anticipating it to surpass smartphone revenue in three years.

Arm’s CFO highlighted that Graviton CPUs run on Arm, benefiting from the growth of AI agents, driving up royalty collections. New versions like Graviton 5 have more cores and advanced Arm design, indicating higher royalty rates. As demand for Graviton and cloud AI chips rises, Arm is poised to benefit, making it a potential winner in the AI boom.

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