Finance
Intel has unveiled its new artificial intelligence chip – can it compete with Nvidia?
The AI wars are starting to heat up.
Up to now, Nvidia (NASDAQ: NVDA) has dominated the AI chip market with an estimated 98% share of the data center GPU market. However, Intel (NASDAQ: INTC) is now throwing its hat into the ring: the company launched its Gaudi 3 AI accelerator on Tuesday.
According to Intel, the new chip is well positioned to take market share from Nvidia. Intel claims:
-
The Gaudi 3 delivers an average of 50% better inference and an average of 40% better energy efficiency than the Nvidia H100
-
The Gaudi 3 sells for a fraction of the cost of the H100.
-
Intel said the new chip would be available to serve manufacturers such as Dell Technologies, Hewlett Packard Enterprise, LenovoAnd Super microcomputer.
-
It also announced new Gaudi customers and partners such as Bharti Airtel, Bosch, IBMand NielsenIQ.
Wall Street reacted largely lukewarm to the news. Intel shares rose 1% on heavy volume on Tuesday before falling 3% on Wednesday on concerns about the warmer-than-expected inflation report.
Although, Intel shares soared in 2023 on hopes of a cyclical recovery in the economy semiconductor sector and the excitement surrounding AI, the stock has remained flat in 2024, down 26% year to date, while the rest of the chip sector has continued to rise on the AI boom. Intel tumbled in January after disappointing fourth-quarter expectations, and shares fell sharply last week when the company announced a $7 billion loss in its foundry segment in 2023 after restructuring its business segments. The company said losses would widen this year before moving toward breakeven in the foundry sector in 2027, and profitability from there.
Intel has a long history of underperforming its peers, and the stock is still not at its peak during the dot-com boom. Over the past decade, Intel shares are up 38%, compared to a 176% gain for Intel stock S&P500. However, the Gaudi 3 gives the company a chance at redemption.
What Gaudi 3 means for Intel
To get an idea of the capabilities of data center GPUs, just take a look at Nvidia’s recent results. The leading AI chip company generated $18.4 billion in data center revenue in the fourth quarter, up 409% from the year-ago quarter. Intel, on the other hand, reported a 10% decline in data center revenues to $4 billion.
The good news for Intel is that it doesn’t need to take much market share from Nvidia to move the needle on AI chips – even $1 billion in revenue per quarter would make sense.
There are still significant shortages of Nvidia’s AI superchips like the H100, and their components are selling at a premium, putting Intel in a good position to grab some market share. However, making a meaningful dent in Nvidia’s AI leadership won’t be so easy.
Nvidia is stepping up its game
Intel’s Gaudi 3 press release and white paper tout its performance compared to Nvidia’s H100 accelerator, attributing the better throughput and inference to its large high-bandwidth memory (HBM), more efficient architecture, and HBM capacity.
The problem with that comparison for Intel is that Nvidia’s H100 is about to be replaced by the Blackwell platform it announced at its developer conference last month. According to Nvidia, Blackwell is four times faster than the H100 and can run large language models with trillions of parameters at up to 25x less cost and power requirements than the H100.
Intel’s Gaudi 3 may have closed the gap with the H100, but Nvidia still wins the AI race with Blackwell, which is expected to be available later this year.
Additionally, Nvidia’s CUDA software platform, which includes developer tools and libraries to help build AI applications, also gives Nvidia an advantage over challengers like Intel, which is trying to match CUDA’s capabilities with an open-source platform.
Finally, Intel’s cost advantage could also be less of an advantage than it seems. There are billions and billions of dollars flowing through the generative AI market right now, and investors and companies are willing to spend their money at this stage to gain a sustainable lead in generative AI, which is a multi-trillion dollar market could be.
While some customers may be more price sensitive than others, computing capabilities, speed and capacity are the key elements that Nvidia, Intel and others love Advanced micro devices compete here, rather than on price.
For Intel, dethroning Nvidia will be difficult: the AI chip leader has been investing in this technology for several years, has a complementary software platform in CUDA and will fight for market share in what is now the vast majority of its revenue.
Intel may be able to bring in enough revenue to make investors happy, but the Gaudi 3 is unlikely to lead to a wholesale shift in AI leadership from Nvidia to Intel. Nvidia investors have nothing to worry about at this stage.
Should You Invest $1,000 in Intel Right Now?
Before you buy shares in Intel, consider this:
The Motley Fool stock advisor The analyst team has just identified what they think is the 10 best stocks for investors to buy now… and Intel wasn’t one of them. The ten stocks that survived the cut could deliver monster returns in the coming years.
Stock Advisor provides investors with an easy-to-follow blueprint for success, including portfolio building guidance, regular analyst updates, and two new stock picks per month. The Stock Advisor service has more than tripled the return of the S&P 500 since 2002*.
*Stock Advisor returns April 8, 2024
Jeremy Bowman has no position in any of the stocks mentioned. The Motley Fool holds positions in and recommends Advanced Micro Devices and Nvidia. The Motley Fool recommends Intel and International Business Machines and recommends the following options: January 2023 long calls of $57.50 on Intel, long January 2025 calls of $45 on Intel, and short May 2024 calls of $47 on Intel. The Motley Fool has one disclosure policy.
Intel has unveiled its new artificial intelligence chip – can it compete with Nvidia? was originally published by The Motley Fool
