One year after Intel’s ambitious push into artificial intelligence (AI) hardware, the tech giant’s Gaudi accelerator chips have yet to live up to sales expectations, highlighting ongoing challenges in the rapidly evolving AI market, which holds significant influence over global technology sectors including Asia.
On Thursday, Intel announced that it had scrapped its forecast of selling over $500 million worth of Gaudi accelerator chips in 2024. These chips, designed to enhance the performance of AI applications by accelerating computations, were anticipated to be a significant growth driver for Intel in the burgeoning AI sector that is increasingly vital to economic developments in Asia and worldwide.
CEO Pat Gelsinger attributed the slower-than-expected adoption of Gaudi chips to software-related issues and the transition from the second to third generation of the chips. “Taking a longer-term view, we remain encouraged by the market available to us,” Gelsinger said in a call with analysts.
While Intel’s overall revenue projections beat expectations, pushing shares up by about 5% in early trading on Friday, the company’s stock remains over 50% lower this year. The lackluster performance underscores Intel’s challenges in capitalizing on the AI boom and catching up with competitors like Nvidia, whose GPUs power popular AI platforms such as ChatGPT.
According to sources, after the launch of ChatGPT in late 2022, Gelsinger pushed for more aggressive sales targets for AI chips, seeking to project at least $1 billion in revenue opportunities, even when internal estimates were lower. Despite announcing a “pipeline of opportunities” worth over $1 billion led by Gaudi in July 2023, Intel had not secured sufficient supply from contract chipmaker TSMC to meet these goals. TSMC’s pivotal role in global semiconductor manufacturing, particularly in the Asia region, emphasizes the interconnectedness of technology supply chains.
Analysts expressed skepticism about Intel’s AI strategy. Vivek Arya of Bank of America questioned the company’s position if its traditional central processing unit (CPU) chips become commoditized and it lacks a competitive AI product. “What is Intel’s AI strategy right now?” Arya asked.
Gelsinger responded by emphasizing the increasing role of CPUs in data centers for AI workloads and noted “good early interest” in Gaudi chips, highlighting impressive benchmarks for the third-generation Gaudi.
Despite cost-cutting measures and a focus on high-growth areas, some investors remain doubtful about Intel’s ability to rebound. Michael Ashley Schulman, chief investment officer of Running Point Capital, commented: “The concern is that Pat Gelsinger may be exaggerating prospects and progress. Intel’s CEO may not have as tight of control on operational levers and customer fidelity as he needs.”
As Intel navigates the challenges of the AI hardware market, particularly in competition with strong players in Asia and beyond, the company’s ability to deliver competitive products and realistic forecasts will be crucial in restoring investor confidence and capturing opportunities in this dynamic sector that is central to global technological advancement.
Reference(s):
cgtn.com
