Intel scraps ambitious forecast for Gaudi AI chip sales

Analysts raise doubts about the company's AI strategy

Image:
Intel has scaled back AI accelerator chip forecast

Intel Corporation, once a dominant force in the semiconductor industry, faces further setbacks in its quest to capitalise on the booming AI market.

The company has abandoned its earlier forecast of selling over $500 million worth of its Gaudi AI accelerator chips in 2024.

In a call with analysts last week, CEO Pat Gelsinger attributed the revised outlook to software-related challenges and the recent transition to the third generation of the Gaudi chip. While Intel's overall revenue forecast for the quarter exceeded analyst expectations, the company's AI ambitions continue to be shrouded in uncertainty.

Gelsinger's optimism about Intel's AI prospects has been tempered by the company's inability to gain significant traction in the market, particularly in the face of strong competition from Nvidia. Despite initial projections of a $1 billion pipeline of opportunities for Gaudi, supply constraints and software issues have hindered Intel's progress.

"No company converts 100% of its pipeline into revenue," Intel said in an earlier statement.

"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."

Analysts and investors have expressed concerns about Intel's AI strategy, questioning the company's ability to compete effectively in a rapidly evolving landscape. Vivek Arya of Bank of America raised concerns about the potential commoditisation of Intel's CPU chips and the lack of a competitive AI product.

As the AI market continues to grow at a rapid pace, Intel will need to execute effectively to regain its position as a leading player in the industry.

Meanwhile, the company on Thursday reported mixed results for its third quarter, beating revenue expectations but falling short on earnings per share. The chipmaker's stock surged over 8% on Friday, buoyed by positive fourth-quarter guidance and strong performance in its datacentre business.

The company reported a loss per share of $0.46 on revenue of $13.28 billion. While this represents a decline from the previous year's earnings and revenue, it exceeded analyst expectations of a loss per share of $0.03 on revenue of $13 billion.

For the fourth quarter, Intel projects revenue between $13.3 billion and $14.3 billion, exceeding Wall Street's forecast of $13.6 billion. The company also announced it has secured two new customers for its advanced 18A processor.

In its Data Center and AI division, Intel reported $3.35 billion in revenue, while the Client Computing segment, responsible for laptop and desktop processors, earned $7.3 billion, slightly below the anticipated $7.4 billion.

Intel's Foundry business, which manufactures chips for its own use and for external clients, generated $4.35 billion, narrowly missing analyst expectations of $4.4 billion.

The company is navigating various hurdles, including challenges in its 18A chip manufacturing and the collapse of a potential deal with Waymo. Intel's Foundry services have encountered past difficulties, such as unsuccessful test runs with Broadcom.

Additionally, Intel continues to face a prolonged downturn in PC chip sales, though recent data indicates a minor recovery. To address these challenges, the company has introduced its second-generation Core Ultra laptop chips, optimised for AI tasks and designed to rival Qualcomm's Arm-based chips with improved battery performance.