Intel: AI Chip Sales To ‘Meaningfully’ Rev Up As PC Revenue Booms
As the semiconductor giant’s AI chip sales pipeline grows to more than $2 billion, Intel experiences double-digit growth in its PC business and struggles with competition in the data center market in the fourth quarter while it starts executing on its ‘AI everywhere’ strategy.
Intel said it expects “meaningful revenue acceleration” for its nascent AI chip business this year after the sales pipeline for such products grew in the double digits to more than $2 billion.
That growth happened in the fourth quarter of last year, Intel CEO Pat Gelsinger disclosed Thursday in an earnings call, and it has prompted the chipmaker to increase supply for its Gaudi 2 AI chip as well as its successor, Gaudi 3, which is due to hit the market later this year.
While the sales pipeline doesn’t represent real revenue, it shows that the semiconductor giant has managed to interest enough customers to consider Intel’s accelerator chips, whether it’s the Gaudi chips or its Max GPUs, as alternatives to Nvidia’s market-dominating data center GPUs.
AI PC Push Lifts Up Intel Amid Data Center Woes
The semiconductor giant gave the AI progress report during its fourth-quarter earnings call, where it said revenue for the period increased 14 percent year-over-year to $15.4 billion.
It was the first time in several quarters that Intel saw year-over-year growth, but it wasn’t enough to offset the revenue declines the company experienced for the first nine months of 2023. This resulted in a full-year revenue of $54.2 billion, which is a 14 percent decrease from 2022.
The uptick in fourth-quarter revenue was mainly the result of strong PC chip sales, but it was part of a larger mixed report on the company’s strengths and weaknesses as it tries to execute on its “AI everywhere” strategy that touches everything from PCs to servers.
Intel’s PC chip business, the Client Computing Group, saw revenue increase 33 percent year-over-year to $8.8 billion as the company shipped its first Core Ultra processors for the emerging category of AI PCs, where its facing fierce competition from AMD, Apple and, soon, Qualcomm.
“We expect to ship approximately 40 million AI PCs in 2024 alone, with more than 230 designs from ultrathin PCs to handheld gaming devices,” Gelsinger said.
Gelsinger said the Client Computing Group’s revenue grew in the double digits for the third quarter in the row. That, he added, reflected a normalization of inventory among Intel’s OEM and channel partners as well as “sustained strength in gaming and commercial” PCs.
Another critical area where Intel hopes to make a big impact in the world of AI is its Data Center and AI Group, but the business didn’t fare well in the fourth quarter, with revenue decreasing 10 percent to $4 billion for the period.
The company cited “ongoing competition” and a contraction in the total available market for data center GPUs as two major reasons why Intel struggled in the area.
Patrick Moorhead, president and principal analyst at Moor Insights and Strategy, told CRN that the fervor around AI computing in the data center held back Intel’s server sales in multiple ways: cloud service providers replacing GPUs rather than entire systems, new servers unable to ship due to GPU shortages, and businesses pausing purchases to figure out their AI strategy.
Gelsinger: 2024 Will Be About ‘Inferencing AI Everywhere’
Gelsinger pointed out that Intel’s Data Center and AI Group revenue was higher than the previous quarter, and the business is poised to make a comeback thanks to its upcoming Sierra Rapids and Granite Rapids CPUs as well as its small but growing AI chip efforts.
“Momentum is building and positioning us well to win back share in the data center,” he said.
While Gelsinger sees promise from activity with Intel’s AI chips, he said the company’s latest Xeon processors will help it win share in the growing AI inference market, where applications make use of deep learning models trained on reams of data to make predictions.
“We do think that the market moves much more from high-end training to inferencing, where our product line is more substantive for it,” he said, adding that he expects businesses to embrace on-premises servers for inferencing purposes.
While Intel’s Network and Edge Group reported that fourth-quarter revenue declined 24 percent to $1.9 billion, Gelsinger said the business will also play an important role in AI workloads, particularly when it comes to inferencing at the edge.
“I think the message of 2024 is going to be inferencing AI everywhere. That's going to be at the edge. That's going to be the AI PC, and it's going to be in the enterprise data center. All areas that Intel has a much stronger footprint,” he said.
Intel’s Forecasted Q1 Sales Growth Not Fast Enough For Wall Street
The company expects that first-quarter revenue will be in the range of $12.2 billion to $13.2 billion, which, at the high end, would represent a nearly 13 percent year-over-year increase.
Its first-quarter guidance is based on the expectation that “client, server and edge” chips will continue “to perform well,” according to Gelsinger. At the same time, Intel foresees “discrete headwinds” from its Mobileye automotive business as well as the Programmable Solutions Group, which became a standalone business earlier this year, and several business exits.
That forecast fell below the expectations of Wall Street analysts, which, on average, hoped for nearly $14.2 billion in revenue for the first quarter, according to Yahoo Finance.
“Importantly, we see this as temporary and we expect sequential and year-on-year growth in both revenue and [earnings per share] for each quarter of fiscal year ,” Gelsinger said. “Momentum and excitement around new products and businesses remain strong as we head into the year and will grow stronger as the year progresses.”
Intel’s stock price was down more than 10 percent in after-hours trading.