AMD and Nvidia Overtake Intel in Key Markets, Challenging Its Leadership
U.S. Chips Act Beneficiary: A Crisis for Intel Corp (NASDAQ: INTC)
The crisis facing Intel Corp (NASDAQ: INTC) appears to be worse than initially thought, as various companies, including Nvidia Corp (NASDAQ: NVDA) and smaller rivals, are aggressively vying for a significant share of the market that is critical for Intel’s profitability. According to Doug O’Laughlin of SemiAnalysis, quoted by the Wall Street Journal, Intel stock has plummeted 58% in the last 12 months due to its failure to capitalize on emerging markets for new kinds of computing and applications for chips.
AMD Surpasses Intel in Data Center Chip Revenue
Advanced Micro Devices (NASDAQ: AMD) has surpassed Intel’s data center chip revenue in the latest quarter, marking a reversal from 2022 when Intel’s data center revenue was three times that of AMD. This development signals a significant shift in the market dynamics, with AMD emerging as a major competitor to Intel in the advanced general-purpose chips business, also known as central processing units (CPUs).
Intel’s Failure to Tap Emerging Markets
Another blow for Intel has been its failure to tap into the burgeoning data centers chip market or the graphics processing unit (GPU) market, which catapulted Nvidia to a trillion-dollar valuation. Despite still having about 75% of the market for CPUs that go into data centers, Intel’s share of revenue from data center chips is significantly lower. This discrepancy raises concerns about Intel’s ability to adapt to changing market demands.
Companies Bypassing Intel’s Proprietary Architecture
Several prominent companies, including Amazon.Com Inc (NASDAQ: AMZN), Microsoft Corp (NASDAQ: MSFT), and Alphabet Inc (NASDAQ: GOOG) (NASDAQ: GOOGL) Google, are aggressively investing in building new data centers. Notably, these companies are bypassing Intel’s proprietary architecture chips, dubbed x86, and instead using a combination of an ARM Holdings plc (NASDAQ: ARM) architecture and their in-house chip designs.
ARM-Based Chips on the Rise
ARM-based chips are increasingly taking center stage in Nvidia’s current-generation AI systems. This development has been accelerated by Microsoft’s collaboration with ARM, which led to the creation of ARM-based laptops running Windows. This has prompted other companies to port their software and create tools that enable programs to run on these new laptops.
Intel Loses Out in PC Gaming Market
Intel also lost out in the PC gaming market to AMD. According to a spokeswoman for Intel, quoted by the WSJ, the company is focused on its product portfolio, manufacturing, and foundry capabilities. However, this failure to adapt has led to significant losses for Intel.
Search for a Permanent CEO Continues
Intel is currently seeking a permanent chief after the chipmaker fired veteran CEO Pat Gelsinger in December. His turnaround efforts, including competing with Taiwan Semiconductor Manufacturing Co (NYSE: TSM), failed to impress the board.
Positive Aspects of Intel
Despite its struggles, there are still some positive aspects of Intel worth noting. The decades-long dedication of developers to software for Intel’s chips bear testimony to its moat despite shrinking market share. This potentially limits its dwindling market share.
Analysts’ Estimates and Market Share
Analysts estimate Intel’s 2024 revenue at ~$55 billion versus Nvidia’s ~$60 billion. Intel still commands a leading market share for desktop and notebook CPUs, according to Mercury Research. Recently, AMD tapped Intel to develop the x86 ecosystem. Intel also boasts a chipmaking deal with Amazon by leveraging its 18A technology.
Intel’s Plans for AI Chips
In 2025, Intel targets the launch of a new AI chip dubbed Falcon Shores. This move is likely aimed at addressing the growing demand for AI chips and positioning Intel as a major player in this emerging market.
Challenges Ahead for Intel
Goldman Sachs’ Toshiya Hari and other Wall Street analysts have flagged competitive and margin challenges for Intel. These challenges are expected to impact Intel’s revenue and profitability in the coming quarters.
Investing in Intel
For investors looking to gain exposure to Intel, there are several options available, including Vanguard S&P 500 ETF (NYSE: VOO) and SPDR S&P 500 (NYSE: SPY).
Price Action
INTC stock is down 1.88% at $20.17 at the last check on Monday.
Analyst Ratings
The latest analyst ratings for INTC can be found below:
| Date | Firm | Action | From | To |
| — | — | — | — | — |
| Mar 2022 | Morgan Stanley | Downgrades | Equal-Weight | Underweight |
| Feb 2022 | Raymond James | Upgrades | Underperform | Market Perform |
| Feb 2022 | BMO Capital Markets | Upgrades | Market Perform | Outperform |
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