Intel has been warned. A new chip on the market could threaten its continued dominance in the chip manufacturing sector. Applied Micro Circuits is shipping a new low-power server chip that has observers wondering if it could cut into Intel's top spot in cutting-edge data centers around the world.

The company, based in Silicon Valley, did have a minor setback this week, however -- its shares dropped 4 percent after it released its second-quarter outlook that was below expectations.

The new chip could be a game changer and help boost the company's stock and interest in the product. The financial pessimism was countered by the company saying that it has begun shipping the X-gene microserver chips that were developed with intellectual property that was licensed from ARM Holdings.

Much of ARM Holdings low-power options are employed in today's smartphones.

While the company only saw around $1 million in revenue from the chips, it expects this to continue to increase as shipments roll out and orders come in. The company is hopeful that in the upcoming two quarters it will see marked improvement in sales and interest.

"There is backlog today on the books for X-Gene, both in the September quarter and December quarter, as well as the March quarter," CEO Paramesh Gopi told analysts during a conference call.

But Intel shouldn't worry too much. As Tech Times reported, the company has launched a new product line that combines the company's Xeon chips with customizable field-programmable data array chips, in a move to address the needs of cloud service providers and carriers for better performance.

"We are engaged with many of the large cloud service providers as well as the telecommunications service providers, the carriers," said Bryant, who refused to identify Intel's partner companies for the project's development.

Either way the chips fall, however, analysts and observers are optimistic that the renewed interest in chip manufacturing can help drive the tech world forward on a number of new and innovative ideas that could streamline how users function in the digital world.

The new chip puts Applied Micro Circuits in the direct line of sight for Intel and the two companies are expected to battle it out over the coming months for chip supremacy.