This time last year, optimism abounded that the proliferation of vaccines and waning Covid rates would lead to a robust rebound for the HPC market in 2021. Needless to say, the back half of 2021 did not deliver on that front, with Covid having its own rebound and accelerating supply chain disruptions. In its new pre-ISC market update, Intersect360 Research made the call: while the HPC market has, to a large extent, recovered from its pandemic position, the duration of the impacts from Covid and supply chain disruptions have quashed hopes of a strong rebound that recoups losses.

The big picture

Last June, Intersect360 had predicted 16.4 percent year-over-year growth for the market, but issued a pessimistic update to its forecast in November as the situation became less promising. The top-line items of this update: after a 0.2 percent decrease in the HPC market in 2020 relative to 2019, Intersect360 estimates that the HPC market grew 5.2 percent year-over-year in 2021 and is projecting a 7.7 percent compound annual growth rate (CAGR) through 2026, led by strong growth in cloud HPC.

“We returned to single-digit growth after a down year in 2020,” explained Addison Snell, CEO of Intersect360. “We were forecasting a huge rebound in 2021 because the pandemic was going to be over! … We weren’t going to have the pandemic any more, and we were going to be up 16 percent year-over-year—didn’t happen. This was well below our previous forecast expectations of a bounce back because we still had the pandemic out there.”

“There was demand for a little more [business] than that, but supply chain kept it down,” Snell said. Per Intersect360’s survey, 20 percent of HPC users had said that supply chain disruptions affected their ability to spend their 2021 budget.

While Intersect360 is predicting that the market will grow at that 7.7 percent CAGR to $59.2 billion by 2026, Snell put a damper on any premature celebrations. “What we really did is we wiped out two years of growth,” he said. “And now we’re going to go back onto a steady growth path—which is good, that we get back to a steady growth path—but really, we got back to a year and a half below the growth that we would have had without the pandemic.”

Breaking it down

Broken down into product types, that 5.2 percent growth in 2021 was led by cloud HPC—up 85.2 percent, compared to 78 percent growth in 2020 (“Cloud does so well with uncertainty,” Snell said). Networking was down after a strong 2020, while servers were up 3.4 percent (below their growth in 2019). “There’s no pandemic recovery to HPC servers; they lost that growth, a lot of it went to cloud,” Snell explained. “The good news: HPC servers … will grow to $17.6 billion in 2026. Bad news: that’s over a billion dollars lower than our previous forecast. It’s actually a billion dollars lower than we had previously forecast for 2025.” Other product types, he said, were more or less flat.

“Cloud, however, has continued not just growth, but breakneck growth,” Snell continued. “It is the seventh straight year of double-digit growth, the second straight year over 75 percent.” Intersect360 is projecting that cloud will “continue its double-digit fast growth in the near term” before flattening out at around 18 percent of HPC spending.

Asked why Intersect360 was projecting a flattening of cloud growth, Dan Olds, chief research officer for Intersect360, explained: “When you think about cloud, there’s no free lunch. They have to buy chips, they’ve got to buy components, … they have to have enough slack space to be able to handle overflow, unanticipated spikes and workloads, and things like that. As clouds get bigger, that amount of slack space gets bigger—not proportionally, necessarily. But it does become—even with the fanciest workload management in the world, it is a huge amount of hardware that will mostly be dark. And that’s the microeconomic way of, at least for my reasoning, as to why cloud will not grow forever.”

Regionally, Snell said, “China was strong, and companies that have a strong presence in China—like Inspur, like Huawei—did pretty well this year.” Fujitsu, meanwhile, was down year-over-year simply because of its strong showing during the Fugaku installation. In terms of sectors, government HPC grew just 3.3 percent after a strong 2020, and the academic HPC sector similarly grew just 2.3 percent. (““I think we were expecting to see [government growth] bigger than that, but we were also expecting a Frontier in there,” Snell said. “We [also] didn’t get a lot of the pre-exascale stuff in Europe yet.”)

Growth was, instead, led by biosciences (for obvious reasons), the commercial sector and—perhaps surprisingly—entertainment (up 12.4 percent), which Snell attributed to a pandemic-savvy shift to digital product workflows, streaming and high-end visual effects work.

But Intersect360 expects all these winds to shift sooner rather than later. “The government sector will lead the growth over the next five years—exascale and an increase in national security spending,” Snell said. “That includes a lot of AI, but that AI is related to HPC spending most of the time when government does it.” And, regionally: “After back-to-back years with Asia-Pacific leading the growth, EMEA is going to have the highest five-year CAGR. We’re going to start to see the pre-exascale and exascale EMEA systems coming online, and that will have the highest overall growth rate despite the fact that North America is also putting in exascale.”

Of major firms, Snell said, “HPE had double-digit growth this year—Cray was strong this year, with installations such as Perlmutter, even without the Frontier system coming in. And we expect we’ll continue to see more good stuff from HPE as some of those exascale systems start to hit.” HPE leads Dell by a small margin.

Also of note

Intersect360 changed up its market reporting a bit this time. “This is the first year that we measured enough discrete AI training on-prem not affiliated with an HPC budget that it really warranted pulling that out separately,” Snell said. That pure-AI, non-HPC spending amounted to some $1.2 billion. Further, this was Intersect360’s first time publishing a total datacenter market number ($235.1 billion, including both on-prem and hyperscale datacenters).

To learn more about Intersect360’s market sizing for 2021 and its projections through 2026, click here.