Inside the AI Infrastructure Revolution—The Arm Perspective

Hey everyone, welcome to this Futurum executive interview series. We're going inside the AI infrastructure revolution, and today I'm joined by Mohamed Awad from Arm to Get the Arm perspective. Mohamed, welcome.

Great to have you on. Thanks for having me. Great to be here.

Yeah. So I wanna start off, let's hit the AI inflection, you know, every day, literally every day it feels like there's news massive investments, whether it's more compute, more energy, uh, you know, more mo new models coming out, the leapfrogging effect. Like, you know, I'd like to get your perspective, like what is defining this moment in the compute revolution, and how do you see arm's role broadly in that landscape?

Yeah, totally. I mean, I think, I mean, I think the easiest, the easiest way to describe is just transformational. I mean, I mean, things are just changing so quickly.

The potential is just massive, you know, and we're really kind of shifting gears in a big way in terms of what compute is and how it works, how energy efficient it can be, and sort of the value that it can provide. I think, you know, the, the world kind of sees that potential. It sees it on the horizon.

We're, we're, we're not there yet. We're kind of early innings, and it's, a lot of it is about, you know, how do we achieve that potential and sort of transform, you know, everything from the, the devices we carry around through to the infrastructure and the, the cloud that, that, uh, that makes it happen. So it's a pretty wild time.

It really is. And, and I speak to so many enterprises every day, and while a lot of us have been really focused on LLMs and how we're using them and the shift in how we search, I think we're in the very earliest innings. I said something the other day, I said, we're about 1% of the way in to ai, and while people think it's farther along, it is not.

Yeah, we're just getting started. But, you know, in terms of like in the hyperscaler space, like, you know, in your business, right? We've seen AWS we're seeing Google, you know, Axion, we're seeing Microsoft, we're seeing, you know, of course Nvidia the grace and you know, and GB and GH and all those different things.

Yeah. Um, it's all on, you know, I think people would love to understand, you know, 'cause we're tracking this very closely too, but the hyperscalers have clearly moved a lot of, a lot of their commitment to arm. What's, uh, kinda what's driving that?

What's the technical reason behind that shift? Yeah, it's, it is, um, you know, we've seen tremendous, tremendous, uh, adoption. We've seen a lot of, a lot of momentum as of as of recent and really a couple, a couple of things.

I mean, at, at its core, it's about this idea that we enable a level of, you know, flexibility and innovation, uh, while still being able to take advantage of an ecosystem. So if you think about how data centers were built in the past, you take some off the shelf compute and you would, you know, build up, everybody knows a story about Google, right? Built in the, in the, uh, in the Stanford dorm room.

And, you know, they just kind of cobbled together off the shelf hardware and it was like, let software figure it out. We're well past that now. The sort of performance demands, the efficiency demands you need, uh, you need these systems built from the ground up and optimized for, uh, for your particular use case.

And so, and that, and that's to get the level of efficiency and get the level of performance out there. And so what you're seeing all these guys, whether it's, you know, whether it's AWS whether it's uh, Google, whether it's Microsoft, whether it's Nvidia, you know, all of them, they're building their own general purpose compute. They're building their own acceleration, they're building their own networking.

And arms get a role to play in all of that. And, and, you know, I think that's really kind of helping, uh, you know, propel us forward, right? Yeah, it's been a great, it's been great to watch the Rise, you know, more competition puts, uh, you know, made the X 86 folks put some effort in to improve what they're doing.

I think competition is good. We always say that, you know, it creates efficiency in the market. It creates, and of course the TAM is rapidly expanding.

A lot of people always want to do these zero something. It's like, oh, if they get it, that means everything's lost. It's like the accelerated compute market's massive.

In fact, you know, I know you probably can't say anything, but I keep saying, I think arm's gonna have a bigger role to play there too, um, pretty soon. So, um, really quickly though, I think we've seen numbers like at AWS like about 50% now of the, the workloads are now running on arm, you know, we definitely measure market share, kind of where do you see your market share sitting right now? Yeah, so AWS actually just at this past reinvent and at the reinvent before talked about this past reinvent.

They talked about how in the last three years more than 50% of the compute they deployed was ARM-based. And it, and it's interesting because, you know, these are guys who are clearly, uh, you know, in front in terms of general purpose compute and what they've done around custom silicon. But if you look more broadly at what's happening with the transition to ai, you know, a lot of these systems that are being deployed are being deployed as full rack solutions.

And those racks, those systems, you know, come with a general purpose compute, they come with a, uh, accelerator and it's all kind of kind of built together. So if you're, if you're deploying in NV L 72, if you're deploying a gra, Grace Blackwell of Vera Rubin, um, you know, if you're deploying your own TPU with a head node or you're deploying your own accelerator, you know, the likelihood that that's arm sitting alongside it is actually pretty high. In addition to that, when you start to think about the networking side, whether it's things like Nitro or you know, Bluefield or otherwise, those are all ARM-based CPUs that are driving those.

And at the end of the day, those are actually offloading what historically was considered general purpose compute. So you've got a lot of compute happening there. Um, so, you know, I, we, uh, we talked about at the beginning of this year how we believe that about 50% of the compute that's gonna be deployed at the top, uh, hyperscalers will be arm based this year.

Um, you know, and we continue to believe that that's gonna be the case. Yeah. So, so quickly, you know, in terms of, you know, as your data center presence continues to grow, I'm glad you mentioned the networking, because that's another huge opportunity.

We see networking as one of those big, like, I think we were obsessed that compute was the constraint, but now we're seeing networking and memory and storage and everything kind of down in the silicon supply chain. Of course, energy's a whole nother topic. So arm's always been very focused on energy efficiency, which is a, a value there too.

But like, what do you see as the big technical eco market related challenges that are gonna, you know, be critical, uh, going forward for the data center? Yeah, this is an AL'S law game, so you're gonna, you're gonna, you know, accel, you know, your accelerators are gonna get better, then you gotta worry about your networking to connect them, and then you gotta worry about your general purpose compute to supply them. I mean, at the end of the day, what we're seeing right now where there are a couple of main challenges, first and foremost is power.

If you think about the sort of scale of what we're trying to accomplish, the amount of power required in order to do that is really beyond what the grid can handle. And so there's real, a couple ways to deal with that. You increase performance per wat, that's the number one game.

So I think that's gonna be a big thing and sort of race to better and better performance for lower and lower power. The second is, you know, availability of silicon. When you think about, um, you know, the, the, the supply chain, when you think about the cost of building the silicon, the time it takes, and then the sort of capacity available, that's gonna continue to be a bottleneck.

So we gotta, again, look for ways to, to further kind of dry that out. And advanced packaging technologies, et cetera, are gonna help with that. But we gotta bring more capacity online.

I mean, I think at the end of the day, um, you know, there isn't gonna be one particular issue. I think there's a bunch of issues, and this is really gonna be an ecosystem wide effort to kind of, you know, uh, you know, squash those issues as they, as they pop up. It's a, it's a classic BELS law problem.

Yeah. And I think the markets, a lot of the market sentiment is grossly underestimating the proliferation, how fast AI's gonna find its way. Like I said, I keep using enterprise, but then even like edge and physical.

So let's talk about that for a minute. Like, that's a lot of the, you know, the genesis of of ARM was always, you know, small, low powered, uh, you know, whether it was mobile devices, but of course you have a business in automotive, you have a business in iot, you a business in, you know, basically all these things. And I think it's a multi-trillion dollar tam sitting out there for that, those markets, you know, talk a little bit about, you know, where's arms edge and, and the, you know, strategy going.

Yeah, I mean, it's, it's, uh, it's ama I mean, you know, it, it's amazing the sort of potential that we see in the edge and kind of how quickly those devices are adopting ai. You know, uh, obviously, you know, we've got about 99% market share in the mobile phone space. We've got an incredible pre presence in areas around physical ai, whether that's things like robotics or automotive or otherwise.

Um, you know, you look at, uh, mobile, um, you look at like, uh, laptop and PC based platforms, which are now going arm based because they're looking, starting to look more and more like, um, you know, they're starting to look more and more like mobile phones. In fact, you know, something like 90% of the apps that are are, that are, uh, run on those devices are actually, um, natively written for ARM already. And so, you know, underlying all of that is when folks look to go take those devices and then expand them, add that AI capability as it becomes infused, leveraging that same software ecosystem, leveraging that same platform that is, you know, they've, they've come to, uh, to build this massive, uh, software base on those devices, but then also that is being used in the cloud, leveraging that same software across both of those places.

We're seeing that as a massive tailwind for us. In fact, you know, we think that the Edge can is gonna be an incredible opportunity for us moving forward, and we're already capturing on it on things like our Lumex platform that we just, uh, that we just launched. Yeah, we expect that to be a really big growth opportunity.

We've been obsessing with data Center for some time, but I think what happens outside the data center is gonna be a, a long, you know, across the next 10 years, it's gonna play a massive role in terms of expanding tam, expanding market opportunity, and of course bringing AI into our everyday lives. So the devices, you know, the last few years it's been all about data center, but I don't think that's gonna stay for the long term. Um, you know, one of the things about ARM that's really interesting is your business model has evolved a lot, was really, you know, a royalty licensing focus.

You've gotten more into custom that senior margins grow a little bit, but just for those out there that are kind of like trying to understand how ARM makes money, how it, you know, goes to market, give us your sort of, the way you explain it, you know, how do you talk about it when you're at the, uh, at the family dinner table and you get Past it? Yeah, I mean, I think the way to think about it is we enable innovation and we enable a, an ecosystem that, um, that, that comes together to build amazing products based on whatever the requirements are. Some cases that means ip, some cases that means compute subsystems.

In some cases that means you work with one of our partners to get something like a triplet or even a full on SOC. And I think the, the, the thing that really separates us from, from, uh, from other companies is our ability to meet you at whatever integration point makes the most sense for you based on the problem you're trying to solve. So in a world that's advancing very rapidly, you're trying to adapt new technologies into it, you're trying to fight for performance per watt off the shelf isn't good enough.

You choose which integration point you want, and arm, arm and more broadly, the arm ecosystem is there to kind of make it happen. Yeah, that's a good way to explain it. I think, uh, you avoided the, the trap I put you in.

I've actually trying to break down the how the, how the different royalty and licensing and subsystem buckets, but I have, uh, it's been good to see you find ways to expand margin by adding more value. 'cause you obviously, as the company continues to be a critical provider of IP to many of the technologies we use every day, how you evaluate that, it's hard when it's only based on unit volume and you know, when you can get a little more out per unit. It's a, it's a good way to increase the, the, you know, the business's value.

Um, as we wrap up here, you know, you heard me allude to, you know, performance per wat leadership or low power. That's always been a big part of the ethos. Um, you know, what are the other advantages that, you know, you think that really are the big reinforcement points for arm's?

You know, unique value proposition? I mean, I think number one, it's ecosystem. When you look at arm, you know, our ecosystem is second to nut.

And so this idea that you can, you know, you know that it's not just arm, but it's entire ecosystem standing beside you ready to help you realize whatever your potential is, uh, you know, and whatever the, the problem is that you're trying to solve, I think that is probably, um, one of, one of the greatest values beyond the sort of performance per watt and just the, the technical chops that we've got. And I think that's so important in an environment like, uh, you know, today where, you know, things are changing so rapidly, whether that's software ecosystem, whether it's our hardware ecosystem, whether it's partners in our arm, total design program, you know, we've got this massive, um, you know, uh, ecosystem ready to kind of support you. That's very different, by the way, than other architectures.

You know, other architectures either have a strong ecosystem where they'll give you an off the shelf solution, maybe have good software, but you kind of get what you get, or you've got incredible flexibility, but you don't have that ecosystem there to support you. You kind of bring the best of the, those two worlds together, and that's really what sets us apart. Mohamed Awad, I wanna thank you so much for joining me on this Futurum executive interview series.

It's great to get a little more insight as to what's going on at arm. We're watching you closely. You can be sure of that.

Uh, congratulations on all the progress so far, and let's, uh, catch up again soon. Thank you. It was great talking to you.