Edge AI could be the next big thing after artificial intelligence.
Almost three years after the AI boom, there's no doubt who the big winner was.
nvidia (NVDA) -2.78%)) Chipmakers jumped market capitalization at around $4 trillion, grabbing much of the loot from new technology. No other companies can get close to that claim.
Nvidia offers GPU and Superchips building blocks to AI tools for power generation like ChatGPT, and it appears that the technical advantages in the region have been enhanced since Openai launched its trademark chatbot.
Whatever happens next with AI, Nvidia plays a big role as it is ambitious enough to deploy new platforms every two years, but Nvidia has risen to control of AI through data centers, responding to the launch of generated AIs like Cloud Hyperscalers and Openai. However, Nvidia doesn't create so-called edge chips that refer to devices people actually interact with, such as smartphones, computers, appliances, and more.
One semiconductor company that serves the edge segment and data centers is Arm Holdings (arm 1.95%))and it appears to be positioned as a leader in next-generation smart devices.
Image source: Getty Images.
What do you do with AI?
My arms are already in AI races. Thanks to its battery-efficient CPU technology, it has a share of over 99% of the smartphone market. This drives growth in data centers, where power efficiency is also premium.
ARM is partnering with NVIDIA and top cloud infrastructure companies Microsoft and alphabetthe architecture of license arms for some chips.
Traditionally licensing its technology and collecting money from selling products with loyalty and architecture, the company is becoming a standalone chip designer and becoming a competitor to customers such as Nvidia.
My arm was hired last month Amazon's Rami Sinno, the AI chip director who led the development of AI chip strains and estimates.
ARM has not made a formal announcement, but media reports say the company is preparing to design and sell its own chips and protect them Meta Platform As one of the first customers of the new data center chip.
In addition to moving towards chip design, ARM has advanced its licenses and moved from the CPU to a more complete package called System-on-chip (SOC).
Why do arms look like winners?
ARM already designs the core technology for most smart devices and looks ready to become the leader in Edge AI. This means devices that run AI that perform AI functions without the need to connect to the Internet.
Given the technical advantages of battery efficiency, ARM appears to be in a good position to dominate the Edge AI market. This is because it has the same power efficiency needs as existing smartphones and AI applications have. The company already manufactures platforms designed for edge AI. It features another platform for machine learning on edge devices, such as the ARM Corstone Platform (IoT) for the Internet of Things.
It could take several years for Edge AI devices to become mainstream, but the market for these smart devices is likely to be huge and can even surpass the cloud AI market in the end.
There is no chip stock that is better positioned to capitalize this transition than ARM. Additionally, the shift to chip design and SOC licensing should accelerate its growth as edge AI develops.
The inventory is expensive, but the reason is expensive. ARM has a wide economic moat thanks to its low power architecture. That business model creates a wide margin. As the previous opportunities expand, ARM is ready to become the winner of the next generation of smart devices.
Jeremy Bowman has positions at Amazon, ARM Holdings, Meta Platforms and Nvidia. Motley Fool has positions for Alphabet, Amazon, Meta Platforms, Microsoft, and Nvidia, and is recommended. Motley Fool recommends the following options: A $395 phone at Microsoft for January 2026 length and a $405 phone to Microsoft for January 2026 short term. Motley Fools have a disclosure policy.
