Just a month after Apple's (NASDAQ: AAPL) announcement of the proprietary M1 chip, news has come out that Microsoft (NASDAQ: MSFT) is also designing its own proprietary processor. The move by Microsoft and Apple's earlier move demonstrates a departure from previous reliance on Intel (NASDAQ: INTC) for processor design.
According to anonymous sources who spoke to Bloomberg, the company will utilize Arm Ltd. designs to create its own processors for use in data centers. There are also rumors that the company will use these same chips in its Surface model PCs. The likelihood of Microsoft putting its efforts into producing a proprietary server chip is higher than the probability of a chip made for Surface products, however, according to the same sources.
The idea of Microsoft potentially producing its chips was hinted at earlier in December by Judson Althoff, an executive Vice President at Microsoft.
"The partnerships that we have though in this realm, from the OpenAI efforts that we have to our relationship with Intel and Arm developments that we have certainly point to the need to have advanced capabilities here, whether we build it first party or have an ecosystem of third-party partners, it's sort of yet to be disclosed," Althoff said during his appearance at the UBS Global, Technology, Media and Telecommunications Conference.
What this news means for Intel is obvious enough: less business with one of the largest tech companies in the world, and just after receiving similar lose last month. Considering how much income Intel receives from its chips business alone, losing Microsoft and Apple to proprietary chips, even only for some products, would have a substantial impact.
In terms of effects on investors, Microsoft seems to have benefitted from the news, while Intel seems to be reeling. From December 18, when the news first broke, to the time of writing on Tuesday, Microsoft benefitted from a 2.4% bump in share price, ending Tuesday at $223.94 after opening Friday at $218.68. Intel, on the other hand, ended up down 8.6% for the same time period, sliding to $46.17 from $50.54.