On October 31, Intel’s optimistic revenue projections overshadowed a significant issue: the company’s AI chips have not met sales expectations.
Intel has now abandoned its forecast to sell over $500 million worth of its Gaudi accelerator chips in 2024, which are designed to enhance the performance of AI applications.
During a conference call with analysts, CEO Pat Gelsinger attributed the lackluster demand to software challenges related to the Gaudi chips and the ongoing transition from their second to third generation.
While Intel’s overall revenue forecast led to a nearly 6% increase in its stock price, the shares remain down more than 50% for the year, highlighting the company’s struggles in capitalizing on the AI boom and executing a successful turnaround.
The underperformance of Gaudi reflects Intel’s ongoing challenges in the AI market, particularly after the company hesitated to adopt a clear strategy to compete with the rapidly ascending Nvidia.
Following the late 2022 launch of the popular ChatGPT, powered by Nvidia GPUs, Gelsinger had anticipated that Intel’s AI chips could attract new business.
However, initial projections suggested that sales might reach only $500 million, prompting Gelsinger to push for more ambitious targets in light of Nvidia’s strong performance.
Despite aiming for a $1 billion pipeline of opportunities for Gaudi in July 2023, Intel struggled with supply constraints from its contract manufacturer, TSMC.
In a statement, Intel acknowledged that while not all pipeline deals convert to revenue, setting ambitious goals for internal teams is a standard practice.
Earlier this year, Intel had indicated that more than $2 billion in AI chip deals could be feasible.
However, Gelsinger’s recent remarks about scrapping the $500 million forecast have raised concerns among analysts.
Bank of America’s Vivek Arya pressed Gelsinger on Intel’s outlook, questioning the company’s future if its CPU chips became commoditized and it lacked a competitive AI product.
Taking a long-term view, Gelsinger maintained that the company remains optimistic about the market opportunities available, but the path ahead is fraught with challenges as it attempts to reclaim its position in the AI chip sector.
