Intel Corp.'s disappointing forecast for the first quarter includes another expected double-digit decline in the company's data center business as the chipmaker has not yet capitalized on its AI opportunities.
Since third-quarter earnings, Intel shares INTC, +0.94% have risen about 50%, driven in part by the potential to provide artificial intelligence chips. One analyst said in November that Intel represented a potential “under-the-radar AI opportunity.” But on Thursday, the company's shares fell about 11% in after-hours trading as first-quarter guidance came in lower than expected.
Also read: Intel's profit forecast falls far short of expectations and the stock is weakening
In the data center, Nvidia Corp. NVDA, +0.42% cleaned up with its graphics unit processors (GPUs) designed for AI training and inference applications. Nvidia's data center business grew nearly 280% in its fiscal third quarter as the company continues to see uninterrupted demand for its GPUs to accelerate AI applications.
However, Intel Chief Financial Officer Dave Zinsner told analysts Thursday that the company has a $2 billion pipeline for its accelerator product line codenamed Gaudi, a chip expected to compete with Nvidia. The next iteration, Gaudi 3, is expected to launch sometime in 2024, but CEO Pat Gelsinger did not provide any information on when.
“While the data center has seen some wallet share shift between CPU and accelerators in recent quarters, we expect growth in CPU compute cores to return to more normal historical rates and our pipelined discrete accelerator portfolio of well over $2 billion to gain traction in 2024,” Zinsner said Thursday.
Marbel Lopez, principal analyst at Lopez Research, said she believes Intel's AI story won't gain traction until the third quarter. “Inferencing is Intel’s strength and that’s where they can win,” she said. “It’s just a longer-term game.”
Some analysts are more skeptical. Gene Munster, managing partner at Deep Water Asset Management, told CNBC after Intel's call that he doesn't think AI will give Intel the big boost it was hoping for. “There are better ways to capitalize on the opportunities of AI silicon,” he said.
Third Bridge analyst Lucas Keh said in a note to clients that he believes Intel's new products are coming to market slower than expected and that software is one of the bottlenecks. He said investors were disappointed by the slower-than-expected launch.
“It also raises the new question of exactly where cloud players’ interest in Nvidia alternatives lies outside of their own custom silicon developments,” Keh said.
In addition to the data center, Intel also has opportunities in the PC space, where it expects new, AI-enabled PCs with Intel chips that can calculate AI queries on the device rather than in the cloud to be on the rise starting this year will be in the second quarter and will run until the second half of 2024.
The lesson here, however, is that investors were a little ahead of the game with Intel's AI story, and a reminder that there's still a lot of hope for AI – but not every company has hard numbers yet.
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