NVIDIA (NASDAQ:NVDA) has managed to carve out a market for its GPUs in the enterprise, selling its Tesla line of GPU accelerator cards for use in supercomputers and high-performance computing applications. These GPUs are typically paired with a CPU from Intel (NASDAQ:INTC), but Intel has also attempted to break into the accelerator card market in recent years with its Xeon Phi line of co-processors. While Intel has seen some success, NVIDIA still has an overwhelming share of the HPC accelerator market, which was as high as 85% last July.

But, the next iteration of Intel's Xeon Phi, known as Knight's Landing, promises to give NVIDIA a real run for its money. Set to launch in 2015, Intel could have a real competitor in the HPC market, which threatens NVIDIA's growing enterprise business.

Why Knight's Landing might take a bite out of NVIDIA

Intel's Knight's Landing and NVIDIA's Tesla are very different products. Knight's Landing will be comprised of up to 72 Silvermont cores, the same cores used in Intel's low-power Atom processors, and it promises to deliver nearly 3 TFLOPS of double-precision computing performance. Tesla is comprised of thousands of GPU cores, and while the highest-end product only produces about 1.4 TFLOPS of double-computing performance, NVIDIA will likely refresh the line before Knight's Landing launches next year.

Certain applications will benefit more from having thousands of specialized GPU cores, while some will perform better with fewer, more powerful CPU cores. But, the big advantage for Intel is that Knight's Landing will be based on the company's 14nm process. NVIDIA still uses a 28nm process, and while it plans to eventually move to a 20nm process, NVIDIA is constrained by the abilities of the foundries to which it outsources manufacturing. NVIDIA only designs its chips, while Intel both designs and manufactures them, and with Intel spending $10 billion on R&D and another $10 billion in capital expenditures annually, it's safe to say that the company will be able to maintain a manufacturing edge over NVIDIA.

This move to 14nm should lead to more power-efficient chips, and with the performance-per-watt very important in supercomputers and HPC applications, this could give Intel a significant advantage over NVIDIA.

One last advantage that the new Knight's Landing will have over NVIDIA's Tesla is that Knight's Landing will be available as a stand-alone processor, as opposed to previous iterations that were solely add-on cards. This means that, instead of needing a CPU as well as an accelerator card, customers will be able to replace both with a single Knight's Landing chip.

This does, however, pose a threat to Intel's Xeon CPUs, which are typically paired with an accelerator card for HPC applications. It also means that Knight's Landing is unlikely to be cheap, since it would need to make up for lost Xeon CPU sales. But, it's still likely to be less expensive than a Xeon CPU plus an NVIDIA Tesla card, and that's what matters.

NVIDIA has one important advantage

While NVIDIA is a hardware company, software is proving to be a source of competitive advantages for the company. Much like NVIDIA provides code to game developers that is optimized for its GPUs, the company also offers tools and libraries written in CUDA, its proprietary GPU compute language, for common mathematical computations. This cuts down on development time and creates some lock-in for NVIDIA's enterprise hardware.

Of the top 100 supercomputers in the world, 18 use NVIDIA GPUs, while only nine use Intel's Xeon Phi. Coupled with NVIDIA's massive HPC market share, and it's clear that a lot of developers are using CUDA, this creates some significant switching costs. So, even if Knight's Landing provides better efficiency and performance than NVIDIA's Tesla, that may not be enough to end NVIDIA's dominance.

The bottom line

Intel's upcoming Knight's Landing will have some serious advantages over Tesla accelerator cards from NVIDIA, but NVIDIA has built an ecosystem around its hardware that may prove difficult to beat. Knight's Landing probably won't move the needle much for Intel, but its success has the potential to disrupt NVIDIA's enterprise ambitions. It's hard to say how this will all shake out, especially with Knight's Landing at least a year away, but NVIDIA certainly has something to worry about.