Intel Corp.'s poor first-quarter estimate includes another expected double-digit drop in the company's data-center business, as the chipmaker has yet to capitalize on its AI opportunity.
Since its third-quarter reporting, Intel's stock INTC, -12.05% has increased by roughly 50%, thanks in part to the possibility to provide chips for artificial intelligence. In November, one analyst stated that Intel represented a potential "under-the-radar AI opportunity." However, on Thursday, its shares fell roughly 11% after hours due to a lower-than-expected first-quarter estimate.
Nvidia Corp. (NVDA, -1.19%) has been cleaning up the data center with its graphics unit processors (GPUs) geared for AI training and inference applications. Nvidia's data-center business increased by roughly 280% in the fiscal third quarter, as the company continues to experience strong demand for its GPUs to accelerate AI applications.
Intel Chief Financial Officer Dave Zinsner told analysts on Thursday that the company has a $2 billion pipeline for its accelerator product line, code-named Gaudi, which is intended to compete with Nvidia. The next edition, Gaudi 3, is planned to launch in 2024, but CEO Pat Gelsinger did not provide a particular date.
"While the data center has seen some wallet-share shift between CPU and accelerators over the last several quarters, we expect growth in CPU compute cores to return to more normal historical rates and our discrete accelerator portfolio, with well over $2 billion in pipeline, to gain traction as we move through 2024," Zinsner said in a statement Thursday.
Marbel Lopez, senior analyst at Lopez Research, believes Intel's AI story will not materialize until the third quarter. "Inferencing is Intel's strength and where they can win," she went on to say. "It's just a longer-term game."
Some analysts are doubtful. Gene Munster, a managing partner at Deep Water Asset Management, told CNBC after Intel's call that he does not believe the company will see the significant boost from AI that it expects. "There are better ways to play the AI silicon opportunity," he went on to say.
Lucas Keh, an analyst at Third Bridge, stated in a client note that he believes Intel's new products are being released at a slower-than-expected rate, with software being one of the bottlenecks. He stated that investors were upset with the slower-than-expected product rollout.
"It also brings the new question of where exactly cloud players' appetite are for Nvidia alternatives outside of their own custom silicon developments," Keh said in a statement.
In addition to the data center, Intel sees opportunities in the PC arena, where it predicts new, AI-ready PCs with Intel chips that can compute AI queries on the device rather than the cloud will begin to take off in the second quarter and continue through the second half of 2024.
However, the lesson here is that investors got ahead of themselves with Intel's AI story, and it serves as a warning that while there is still a lot of excitement around AI, not every firm has actual figures yet.