Intel Misses Opportunity in Artificial Intelligence
Reports suggest that OpenAI was very interested in investing in Intel at the time, as it would reduce their dependence on NVIDIA chips and potentially allow OpenAI to lead in building its own infrastructure. However, Intel's data center division did not want to produce AI chip products at cost price, thus missing out on a deal that could have been valued at $80 billion.
Two informed sources revealed that OpenAI was very interested in investing in Intel at the time, as it would reduce their dependence on NVIDIA chips and allow the startup to build its own infrastructure.
The sources added that another reason for the deal's failure was that Intel's data center division did not want to produce products at cost price.
An Intel spokesperson did not answer questions about the potential deal. Swan did not respond to requests for comment, and OpenAI declined to comment.
In fact, since 2010, Intel has tried at least four times to self-develop and produce or directly invest in AI chip companies. At the time, these plans did not impact NVIDIA or AMD, and could have entered the rapidly expanding and profitable GPU or AI chip market. However, in the end, this chip giant, established for over half a century, did not implement the aforementioned plans and missed out on the revenue growth brought by the generative AI wave.
In hindsight, this has become one of a series of strategic mistakes Intel has encountered in the AI era.
Additionally, Alexei Oreskovic, a veteran reporter covering the tech industry for over two decades and technology editor at Fortune, commented that the report of Intel refusing to invest in OpenAI reminded him of Intel's refusal to Apple's request to supply processors for the iPhone, a mistake that caused Intel to miss the opportunity to shift towards the mobile sector.
This series of strategic mistakes has also left Intel struggling to keep up in the AI era. Last week, after Intel's second-quarter results were announced, its stock price fell by more than a quarter, marking the largest trading day decline since 1974. This is also the first time in 30 years that Intel's market value has fallen below $100 billion.
Currently, Intel not only pales in comparison to its competitor NVIDIA, which has a market value of $2.6 trillion, but also lags behind AMD with a market value of $218 billion. The once invincible Intel seems to have gone from "big brother" to "little brother."
Tech Vortex believes that we can recall that when Intel made this decision, they were at their peak and naturally wouldn't have taken a small OpenAI seriously. It is precisely this decision, which now seems somewhat absurd, that has made their development in the AI era particularly difficult.
Where is Intel's path in the AI era?
Intel released its financial report for the second quarter of 2024. At the same time, due to lower-than-expected performance, Intel officially announced the previously rumored layoff plan. The company's stock price plummeted 22% before the market opened on August 2.
The financial report shows that Intel's second-quarter revenue was $12.8 billion, down 1% year-on-year, with adjusted earnings per share of 2 cents, both lower than analysts' expectations. The net loss was $1.6 billion, compared to a net profit of $1.5 billion in the same period last year, turning from profit to loss year-on-year.
Intel CEO Pat Gelsinger admitted in the earnings call that "the financial performance in the second quarter was disappointing." He stated that part of the reason for the lower-than-expected profitability was Intel's decision to accelerate the production capacity of the new generation AI PC processor, Core Ultra AI CPU. Although it will put pressure on profit margins in the short term, the company believes this trade-off is worthwhile. Intel expects the market share of AI PCs to grow from less than 10% currently to over 50% by 2026.
The financial report shows that the revenue of the data center and AI department, which once contributed considerable income to Intel, declined by 3% to $3 billion this quarter.
Moreover, unlike the general practice adopted by competitors, Intel does not only focus on chip design but also takes care of manufacturing, not completely outsourcing to foundries like TSMC. Its foundry division's revenue improved in the second quarter, increasing by 4% year-on-year to $4.3 billion, but still has some distance to catch up with TSMC. Financial data disclosed by Intel in April 2023 showed that its foundry business revenue declined by 31%, and operating losses increased by nearly 35% to $7 billion compared to 2022.
In early August, along with Intel's performance, a notice of 15,000 layoffs was announced.
Intel CEO Pat Gelsinger stated that this is part of the company's $10 billion cost-cutting plan. "I don't imagine the road ahead will be smooth sailing. You shouldn't either. Today is a difficult day for all of us, and there will be more difficult days ahead."
Regarding the extent to which the layoffs will involve Chinese operations, Intel told Time Weekly reporter: "This reduction measure is global. The company will not announce the number of affected employees by specific regions or locations." Intel stated that it is working to accelerate its strategy while significantly reducing costs. It will reduce costs and improve efficiency through various measures, including cutting positions in some business and functional departments across the company.
Gelsinger stated that Intel did not achieve the expected revenue growth because it has not fully benefited from the powerful trends of new technologies such as AI, and currently "costs are too high and profits are too low."
But how can Intel benefit from the big trend of AI technology? Relying solely on AI PCs is far from enough.
Tech Vortex believes that the cost-cutting plan may boost Intel's recent financial situation, but this measure alone is not enough to improve the company's position in the chip market. As a global veteran chip manufacturer, Intel is at a "critical period," that is, how to use U.S. investment in domestic manufacturing and the surge in global demand for AI chips to continue to stand firm in the chip manufacturing field.
In Conclusion
In recent years, although Intel has maintained strong dominance in the processor field, with the advent of the AI era, it has made almost no progress in areas such as GPUs. The heavily promoted ARC series graphics cards have almost disappeared in the market, and progress in AI chips lags behind AMD and Qualcomm. At the same time, it also faces attacks from Qualcomm and AMD in the server market.
At this point, we can't help but ask, where is Intel's future?