A year later, Intel's highly publicized AI-chip deals have not met expectations
A year later, the ambitious AI-chip deals announced by Intel have not met expectations.
TroibNews 
Intel's optimistic revenue projections announced on Thursday highlighted a significant issue: the company’s chips designed for artificial intelligence (AI) have fallen short of sales expectations.
The chipmaker abandoned its earlier forecast that it would sell over $500 million worth of Gaudi accelerator chips in 2024—these chips are intended to enhance the performance of AI applications.
In a discussion with analysts, CEO Pat Gelsinger pointed to software challenges related to Gaudi and the recent shift from second to third-generation chips as reasons for the lackluster demand.
Despite the positive overall revenue forecast, which drove Intel shares up by about 5 percent in early trading on Friday, the stock is still down more than 50 percent for the year, as the company grapples with missing out on the AI boom and faces difficulties in its turnaround efforts.
The disappointment surrounding Gaudi highlights Intel's persistent struggles in the AI arena, especially after it opted not to adopt a singular strategy to challenge its soaring competitor, Nvidia. This situation reflects Intel's ongoing challenges in fulfilling promises made to investors.
After the viral launch of ChatGPT in late 2022, which utilizes Nvidia GPUs, Gelsinger was optimistic that Intel’s AI chips could capture new business opportunities.
When Intel teams estimated they might sell a maximum of $500 million, Gelsinger reportedly told his executives that this figure was too low, as indicated in a special Reuters report published Tuesday.
Gelsinger noted that Intel needed to project at least $1 billion in sales when Nvidia's comparable figures were significantly higher. In July 2023, he showcased a "pipeline of opportunities" exceeding $1 billion led by Gaudi.
However, two sources revealed to Reuters that Intel had not secured enough supply from TSMC, its contract chipmaker, to achieve this target.
In an earlier statement, Intel maintained that Gelsinger’s comments accurately reflected potential deals. "No company converts 100 percent of its pipeline into revenue," Intel stated. "We make no apologies for setting ambitious internal targets for our teams – and we will always try to exceed the goals we set for ourselves."
By January this year, Intel indicated to investors that over $2 billion in AI-chip deals could be realized. In April, Gelsinger anticipated more than $500 million in AI revenue for 2024, but on Thursday, he rescinded that projection.
"Taking a longer-term view, we remain encouraged by the market available to us," Gelsinger stated.
Analysts were straightforward with their inquiries.
Vivek Arya of Bank of America questioned Gelsinger about Intel's prospects if its central processing unit (CPU) chips became commoditized and if there was "no competitive AI product."
"What is Intel's AI strategy right now?" Arya inquired.
Gelsinger replied that CPUs are increasingly significant in data centers for AI, and there has been "good early interest" in Gaudi, with impressive benchmarks for the chip's third generation.
Intel reported third-quarter revenue of $13.3 billion, surpassing analysts' forecasts. Nevertheless, it recorded a $16.6 billion loss due to impairment and restructuring charges.
Michael Ashley Schulman, chief investment officer of Running Point Capital, expressed optimism about Intel's potential for recovery due to its cost-cutting and growth strategies.
Yet, he voiced concerns. "The concern is that Pat Gelsinger may be exaggerating prospects and progress," Schulman remarked. He suggested that Intel's CEO might not maintain as tight control over operational levers and customer loyalty as required.
Sanya Singh contributed to this report for TROIB News
The chipmaker abandoned its earlier forecast that it would sell over $500 million worth of Gaudi accelerator chips in 2024—these chips are intended to enhance the performance of AI applications.
In a discussion with analysts, CEO Pat Gelsinger pointed to software challenges related to Gaudi and the recent shift from second to third-generation chips as reasons for the lackluster demand.
Despite the positive overall revenue forecast, which drove Intel shares up by about 5 percent in early trading on Friday, the stock is still down more than 50 percent for the year, as the company grapples with missing out on the AI boom and faces difficulties in its turnaround efforts.
The disappointment surrounding Gaudi highlights Intel's persistent struggles in the AI arena, especially after it opted not to adopt a singular strategy to challenge its soaring competitor, Nvidia. This situation reflects Intel's ongoing challenges in fulfilling promises made to investors.
After the viral launch of ChatGPT in late 2022, which utilizes Nvidia GPUs, Gelsinger was optimistic that Intel’s AI chips could capture new business opportunities.
When Intel teams estimated they might sell a maximum of $500 million, Gelsinger reportedly told his executives that this figure was too low, as indicated in a special Reuters report published Tuesday.
Gelsinger noted that Intel needed to project at least $1 billion in sales when Nvidia's comparable figures were significantly higher. In July 2023, he showcased a "pipeline of opportunities" exceeding $1 billion led by Gaudi.
However, two sources revealed to Reuters that Intel had not secured enough supply from TSMC, its contract chipmaker, to achieve this target.
In an earlier statement, Intel maintained that Gelsinger’s comments accurately reflected potential deals. "No company converts 100 percent of its pipeline into revenue," Intel stated. "We make no apologies for setting ambitious internal targets for our teams – and we will always try to exceed the goals we set for ourselves."
By January this year, Intel indicated to investors that over $2 billion in AI-chip deals could be realized. In April, Gelsinger anticipated more than $500 million in AI revenue for 2024, but on Thursday, he rescinded that projection.
"Taking a longer-term view, we remain encouraged by the market available to us," Gelsinger stated.
Analysts were straightforward with their inquiries.
Vivek Arya of Bank of America questioned Gelsinger about Intel's prospects if its central processing unit (CPU) chips became commoditized and if there was "no competitive AI product."
"What is Intel's AI strategy right now?" Arya inquired.
Gelsinger replied that CPUs are increasingly significant in data centers for AI, and there has been "good early interest" in Gaudi, with impressive benchmarks for the chip's third generation.
Intel reported third-quarter revenue of $13.3 billion, surpassing analysts' forecasts. Nevertheless, it recorded a $16.6 billion loss due to impairment and restructuring charges.
Michael Ashley Schulman, chief investment officer of Running Point Capital, expressed optimism about Intel's potential for recovery due to its cost-cutting and growth strategies.
Yet, he voiced concerns. "The concern is that Pat Gelsinger may be exaggerating prospects and progress," Schulman remarked. He suggested that Intel's CEO might not maintain as tight control over operational levers and customer loyalty as required.
Sanya Singh contributed to this report for TROIB News
