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Advanced Micro Devices wants to bet the farm on data centers

Advanced Micro DevicesAdvanced Micro Devices
Advanced Micro DevicesPhoto: Ashley Pon/Bloomberg/Getty

After missing out on mobile and playing second fiddle to Intel for decades in the personal computing market, Advanced Micro Devices is ready to remake itself with a new type of semiconductor and venue for sales. This time it’s using a combination of the graphics chips found in gaming consoles and the traditional X86 chips inside a computer to make what it hopes is its ticket to success in the corporate data center market.

At its first analyst day event on Wednesday under new CEO Lisa Su, the 40-year-old-plus chip company said it would go after the data center market in order to make up for the lagging sales of personal computers.

“This is probably the single biggest bet we are making as a company,” said Su, who acknowledged that AMD’s data center business currently produces less than $300 million a year. This number is fiddlesticks compared to the $3 billion a year it derives from selling chips to video game console makers like Microsoft (MSFT) and Sony (SNE) as well as other companies involved in the gaming business. And it’s even less when compared to the $3.7 billion that Intel’s data center group took in last quarter.

Su said that the “data center is practically greenfield for us” and she acknowledged at several points that it’s going to be challenging for the company to penetrate the market. What will make AMD stand out, however, is its investment in its lineup of chips that can tap into the powers of both a CPU (the brains behind a chip’s computing powers) and a GPU (a processor that helps render graphics) instead of only one or the other, AMD’s leadership team claimed.

These hybrid chips are great for video game console makers because their machines need help rendering high-end graphics without sacrificing speed. And it’s not just graphics that get a boost from the chips; these chips could help with some of the more power-hungry tasks performed in the data center, like analyzing tons of data with the help of emerging data-crunching technologies like the Hadoop distributed file system.

Former AMD corporate vice president now turned analyst Patrick Moorhead explained to Fortune in an email that AMD’s previous lack of investment in the server market has set the company back, but now that it appears to be doubling down, Moorhead “can see them doing a lot better now.”

However, Moorhead wrote that there are still challenges.

“This new approach using interposer technology could give them a time to market advantage, but it isn’t a sustainable one,” Moorhead wrote. Others will adopt this approach and therefore [ADM’s] CPU and GPU IP will still need to be stellar on their own.”

Considering Intel has been investing in its own lineup of custom chips to sell to the same players AMD appears to be targeting, it’s not going to be easy for AMD to just ease its way into the data center market. The company has been criticized for missing the boat on the rise of mobile technology and it doesn’t look likely that it’s going to gain any momentum in that space any time soon. With revenues on a downward slump, it maybe better late than never for AMD to target the data center market.