LAS VEGAS--The unthinkable has happened: the tiny ARM processors that power the world's cell phones will assail the Intel-dominated desktop and server segments--with Microsoft making it possible.

PCs with ARM chips running Windows in the future

Nvidia's "Project Denver" will build ARM processors for desktops, servers, and supercomputers. Significant on its own, but it takes on a bigger meaning with Microsoft moving its next version of Windows to ARM.

"Microsoft's announcement [Wednesday at CES] that it is bringing Windows to ultra-low power processors like ARM-based CPUs provides the final ingredient needed to enable ARM-based PCs based on Denver," Bill Dally, Nvidia's chief scientist, wrote in blog today.

Dally continued. "Along with software stacks based on Android...and [Apple's] iOS, Windows for ultra-low power processors demonstrates the huge momentum...that will ultimately propel the ARM architecture to dominance," he wrote.

Those are fighting words for Intel. And it recognizes the challenge. "Intel and ARM is the next big battle. We know this," said a source close to Intel today.

Interestingly, Nvidia's future chips will be hybrids--much like Intel's Sandy Bridge processor--also announced today at CES. "Project Denver...features an Nvidia CPU (central processing unit) running the ARM instruction set, which will be fully integrated on the same chip as the Nvidia GPU (graphics processing unit)," Dally wrote in his blog.

And with other chip companies like Qualcomm and Texas Instruments are also pushing ARM designs, Intel indeed has something to worry about. "ARM is the fastest-growing CPU architecture in history," said Jen-Hsun Huang today, chief executive of Nvidia. He's not exaggerating.