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Intel’s disappointing first-quarter outlook includes an expected further double-digit decline in its data center business as the chip maker has yet to take advantage of the AI opportunity.
Since the third quarter results, Intel stock INTC,
Shares have soared about 50% on the possibility of providing chips for artificial intelligence. One analyst said in November that Intel is a potential “under the radar AI opportunity.” But on Thursday, the company’s stock fell about 11% in after-hours after the company missed expectations for the first quarter.
Also read: Intel’s profit forecast is significantly lower than expected, and stock price is sluggish
The data center is Nvidia Corp. NVDA,
uses a graphics unit processor (GPU) designed for AI training and inference applications to do the cleanup. Nvidia’s data center business grew nearly 280% in the fiscal third quarter, driven by continued demand for GPUs to accelerate AI applications.
But Intel Chief Financial Officer Dave Zinsner told analysts Thursday that the company has a $2 billion pipeline for its accelerator product line, codenamed Gaudi. The chip is expected to compete with Nvidia. The next version, his Gaudi 3, he expects to be released sometime in 2024, but CEO Pat Gelsinger did not give a specific date.
“Over the past few quarters, data centers have seen a shift in wallet share between CPUs and accelerators, but CPU compute core growth has returned to more normal historical rates, with pipes well over $2 billion in growth. We’re excited about our discrete accelerator portfolio with lines and we look forward to building momentum as we head into 2024,” Zinsner said Thursday.
Marvell Lopez, principal analyst at Lopez Research, said she doesn’t think Intel’s AI story will take off until the third quarter. “Inference is Intel’s strength, and it’s an area where Intel can win,” she said. “It’s just a long game.”
Some analysts are more skeptical. Gene Munster, managing partner at Deep Water Asset Management, told CNBC after Intel’s call that he doesn’t think Intel will get as much out of AI as it hopes. “AI He has a better way to take advantage of the opportunities in silicon,” he said.
Third Bridge analyst Lucas Kaye said in a note to clients that Intel’s new product launches have been slower than expected, with software becoming one of the bottlenecks. He said investors were disappointed with slower-than-expected product launches.
“This also brings new questions about where exactly is the demand from cloud players for Nvidia alternatives other than their own custom silicon development,” Keh said.
In addition to data centers, Intel also has opportunities in the PC space, where we believe new AI-enabled PCs powered by Intel chips that can compute AI queries on-device rather than in the cloud will become popular starting in 2015. It will run from the second quarter until the second half of 2024.
But the lesson here is that investors were a little ahead of the curve on Intel’s AI story, and it’s a reminder that there’s still a lot of hope in AI. However, not all companies have concrete numbers yet.
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