Intel has recently launched its latest data center processor and AI accelerator, showcasing its ability to deliver essential products to customers despite facing historic financial challenges that cloud its outlook.
This week, Intel rolled out the Gaudi 3 AI accelerator and the Xeon 6 CPU, its most powerful chip yet, to server manufacturers for customer distribution. The company had shared details about these products back in June and has successfully brought them to market as planned.
The timing of these product shipments coincided with reports that Qualcomm had approached Intel regarding a potential friendly acquisition and that Apollo Global Management had proposed an equity-like investment of up to $5 billion. These developments were reported by Bloomberg and The Wall Street Journal, citing anonymous sources.
Intel is currently evaluating all its options as it navigates one of the most challenging financial periods in its 56-year history, with its market capitalization now a mere third of what it was four years ago and a share price decline of about 60%. This marks the company’s third consecutive year of falling sales.
While analysts believe Intel has the resilience to endure this turmoil, their primary concern focuses on how the company’s significant cash shortage will reshape its operations. Future investors are likely to expect Intel to divest non-core assets related to its main business of designing and manufacturing chips for data centers and PCs.
David Nicholson, chief research officer at The Futurum Group, noted, “The value that people want to unlock from Intel is not about growth opportunities, but rather about optimization. It’s about determining how much excess we can trim while maintaining strength. How valuable would that core competency be over time?”
Intel’s non-core offerings include network adapters, controllers, Wi-Fi, and Bluetooth chips. Earlier this year, the company spun off its programmable solutions group, which produces field-programmable gate arrays for customizable hardware.
Xeon 6 and Gaudi 3 Align with Market Needs
According to analysts, the Xeon 6 and Gaudi 3 represent Intel’s strategic move into the booming AI market, which is currently dominated by cloud providers reliant on Nvidia’s high-cost GPUs for training generative AI models.
However, analysts anticipate a shift in this dynamic over the coming years. Enterprises are moving towards purchasing servers equipped with dedicated AI accelerators and CPUs featuring neural processing units (NPUs) to execute small, targeted AI models, such as predictive analytics in advanced manufacturing or natural language processing for document searches.
The Futurum Group predicts that AI processing via CPUs in data centers will grow by 28% annually through 2028, reaching $26 billion. Moreover, the market for integrated processor architectures, combining CPUs, GPUs, and NPUs, is expected to expand by 31% annually to $3.7 billion.
Intel’s product strategy aligns with these trends, potentially attracting investor interest. A takeover is viewed as unlikely, as prospective buyers would likely push for substantial cuts, including divesting Intel’s foundry business, which reported a $7 billion operating loss in 2023.
Intel’s effort to revive its foundry segment is tied to the $8.5 billion investment awarded by the federal government under the Chips Act, aimed at revitalizing domestic chip production. Any significant business changes would face scrutiny from federal regulators.
Jack Gold, principal analyst at J. Gold Associates, remarked, “At this point, few would be interested in acquiring all of Intel in its entirety.”
Analysts agree that revitalizing Intel’s finances is a long-term process, and quick solutions are unrealistic. Shane Rau of IDC stated, “The best outcome for Intel, the semiconductor industry, and Wall Street is patience. This situation needs time to unfold, and hasty resolutions won’t be beneficial.”
Antone Gonsalves is an editor at large for TechTarget Editorial, specializing in industry trends critical to enterprise technology buyers. He has been involved in tech journalism for 25 years and is based in San Francisco.
In competition, the Intel Gaudi 3 faces off against the AMD Instinct MI325X accelerator.