New
Intel Just Gutted Its Ai Chip Ambitions
Intel (NASDAQ: INTC) has largely failed to tap into soaring demand for artificial intelligence (AI) accelerators. The company's acquisition of AI chip start-up Habana Labs back in 2019, three years before the AI boom kicked off in earnest, certainly seemed like a prescient move. Habana's Gaudi family of AI accelerators, which were tailor-made for AI workloads compared to more general-purpose GPUs, had all the makings of a big winner.
Intel is now on the third generation of its Gaudi AI chips, and progress has been excruciatingly slow. The company set a goal of selling $500 million worth of AI accelerators last year, a target that it ended up missing. Meanwhile, Nvidia is churning up tens of billions of dollars in AI chip revenue each quarter, and AMD has guided for about $5 billion in AI chip sales for 2024.
Start Your Mornings Smarter! Wake up with Breakfast news in your inbox every market day. Sign Up For Free »
One big problem for Intel has been software. Gaudi is not a GPU, so the architecture is very different from the AI accelerators that currently dominate the market. Despite aggressive pricing from Intel, an immature software ecosystem has been holding Gaudi back. Intel has had some wins, including a deal with IBM to put Gaudi 3 chips in IBM's cloud data centers. Unfortunately for Intel, these wins just haven't been big enough to really move the needle.
Shaking up the roadmap
Intel's AI accelerator roadmap has been a bit scattered for quite a while. Until last week, the plan was to launch Falcon Shores in late 2025. Falcon Shores is a more traditional GPU that was expected to incorporate some features from the Gaudi family of chips. The planned end of the Gaudi chip family and the switch to an entirely new architecture may have been factors that kept potential Gaudi customers away.
During its fourth-quarter earnings call on Thursday, Intel disclosed that Falcon Shores was being scrapped as a commercial product. The new plan is to use Falcon Shores as an internal test chip as the company focuses on rack-level AI solutions built around Jaguar Shores, which was supposed to be Falcon Shores' successor.
This effectively marks the end of Intel's efforts to become a major supplier of AI accelerator chips. Instead, the company is pivoting to broader AI solutions for data centers. Jaguar Shores can be paired with the company's Xeon server CPUs and other Intel technologies, a strategy that certainly makes sense, given the difficulties Intel has had selling its Gaudi chips.
"Falcon Shores will help us in that process of working on the system, networking memory, all the component functions of that, but what customers really want is that full-scale rack solution. And so, we're able to get to that with Jaguar Shores," said Intel interim co-CEO Michelle Holthaus.
No AI comeback in 2025
Jaguar Shores isn't expected to launch until sometime in 2026, and Intel's shift away from focusing on stand-alone AI accelerators may further depress interest in the company's Gaudi family of chips. 2024 was a disappointing year for Intel's AI business, and 2025 isn't looking much better.
In the long run, Intel's new focus on AI systems rather than AI chips might be the best way for the company to finally break into the data center AI market. Gaudi certainly had potential, but the company bungled its opportunity to become a major player in the AI accelerator market.
Intel can still turn itself around, but AI chips won't be a factor. Instead, the company will need to rely on its foundry business and its upcoming PC and server CPUs to carry it to the finish line.
Should you invest $1,000 in Intel right now?
Before you buy stock in Intel, consider this:
The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Intel wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.
Consider when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $735,852!*
Stock Advisor provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. The Stock Advisor service has more than quadrupled the return of S&P 500 since 2002*.
*Stock Advisor returns as of January 27, 2025
Timothy Green has positions in Intel and International Business Machines. The Motley Fool has positions in and recommends Advanced Micro Devices, Intel, International Business Machines, and Nvidia. The Motley Fool recommends the following options: short February 2025 $27 calls on Intel. The Motley Fool has a disclosure policy.
