• Intel is working to reestablish itself as the one of the world’s preeminent chip designers, while also advancing its ability to make chips.
• Intel recently unveiled its latest Gaudi 3 enterprise GPU, which is intended to compete with Nvidia’s popular H100 GPU. 
• Intel expects to make Gaudi 3 available to customers in the second quarter. Companies such as Dell, Hewlett Packard Enterprise and Super Micro already indicate they will use the Gaudi 3.

Intel (INTC) holds a pivotal place not only in the technology sector but in the broader arc of human civilization due to its foundational contributions to computer technology.

The company is widely recognized for creating the first-ever commercially available microprocessor, the Intel 4004, in 1971. This pioneering chip heralded the modern era of computing by integrating all the functions of a computer’s central processing unit (CPU) on a single chip. 

While the 4004 itself was primarily designed for advanced calculators, its architecture laid the groundwork for the more complex CPUs and later, graphics processing units (GPUs) that are critical to today’s computers and artificial intelligence (AI) technology.

These advancements have profoundly impacted various sectors, driving innovations across numerous fields.

Intel has faced challenges in recent years, losing some of its industry dominance. However, the company is now intensely focused on reclaiming its leadership position, potentially crafting one of the most remarkable turnaround stories in business history.

Taking on the giants

Intel’s strategy is ambitious, directly targeting industry giants such as Nvidia (NVDA) for its prowess in GPUs, and Taiwan Semiconductor Manufacturing (TSMC) in the foundry sector. 

Specifically, Intel is advancing its capabilities to develop innovative “discrete” GPUs that cater to the burgeoning AI sector. Simultaneously, it aims to establish itself as a leading-edge semiconductor foundry, with special emphasis on the production of AI-driven semiconductor technologies.

Semiconductor foundries specialize in the manufacturing process, producing chips based on designs from companies. without fabrication capabilities. Such chip design companies (aka fabless companies), on the other hand, focus on designing and developing semiconductor chips without manufacturing them, relying on foundries for production. This division allows design companies to concentrate on innovation and design optimization, while foundries focus on manufacturing efficiencies and advancing production technologies.

Importantly, however, there are also firms known as “integrated device manufacturers” (IDMs) that handle both the design and manufacturing of semiconductor chips. Prominent IDMs include Micron (MU), Samsung (SSNLF), STMicroelectronics (STM) and Texas Instruments (TXN). Intel is also notable in this category. 

Currently, Intel devotes a sizable portion of its foundry output to personal computers (PCs), laptops, workstations, and networking/communications platforms. Looking ahead, Intel is positioning itself to become a leader in the manufacture of enterprise-focused GPUs, which are increasingly in demand due to their effectiveness in training and running generative AI platforms.

What Intel plans to do

Experts expect the discrete GPU market to grow at a rapid clip in the coming years, which helps explain why Intel is trying to advance its capabilities in the market.

To achieve its goals, Intel must design chips on par with those from Nvidia, while also producing them internally at a level of sophistication comparable to Taiwan Semiconductor. Currently, Intel can’t produce the most advanced GPUs and must contract with other global manufacturers (including Taiwan Semiconductor) to produce them. 

At present, Intel’s market capitalization is roughly $130 billion, while Nvidia and Taiwan Semiconductor are valued at around $2 trillion and $700 billion, respectively. Should Intel achieve its goals—or even half its goals (one or the other)—it’s easy to see how the company’s market cap could increase, potentially substantially.

Intel unveils Gaudi 3 to compete with Nvidia’s AI-focused enterprise GPUs

Intel recently stepped up its efforts in the field of discrete GPUs with the Gaudi 3, the latest addition to its AI-focused chipset series.

The new chip targets the enterprise data market, a sector crucial for training and operating generative AI platforms, positioning Intel to potentially rival, or even surpass, Nvidia’s offerings.

Intel has indicated that key AI infrastructure players such as Dell (DELL), Hewlett Packard Enterprise (HPE) and Super Micro Computer (SMCI) will integrate Gaudi 3 chips into their AI-focused enterprise products/solutions. And at present, Intel expects that the new Gaudi chips will be available to customers in the second quarter of this year.

In terms of performance, Intel has indicated the Gaudi 3 is a strong contender against Nvidia’s H100 GPU. Intel claims that the Gaudi 3 is more than twice as power-efficient and can process AI models one-and-a-half times faster than the H100. According to The Globe and Mail, Intel says that the Gaudi 3 delivered “50% better inference and 40% better power efficiency on average than Nvidia’s flagship H100 GPU” and “at a fraction of the cost.” The price of a Gaudi 3 chip hasn’t yet been revealed.

In the world of generative AI, “inference” refers to the process of using a trained model to generate outputs based on new inputs. This is distinct from the training phase, where the model learns from a dataset by adjusting its parameters to minimize errors. Once the model is trained, it can be used for inference, which involves the use of real-world data to generate text, images and other forms of content.

Importantly, however, Nvidia isn’t sitting on its hands, the company recently unveiled its latest generation of enterprise-focused GPUs (referred to as the “Blackwell” B100 and B200). From that perspective, Intel’s Gaudi 3 chips may stack up well against Nvidia’s previous generation of chips, but not necessarily the upcoming generation. As highlighted below, Nvidia’s technological advantage has allowed it to strengthen its grip in the enterprise-focused AI chip market. 

Source: X.com

Technologically, Intel has made notable strides with the Gaudi 3, potentially narrowing the gap with Nvidia. However, it still faces the challenge of matching or exceeding the performance features of Nvidia’s upcoming GPU models. Intel might leverage competitive pricing strategies for the Gaudi 3 to penetrate the lower end of the enterprise market, potentially gaining traction where cost-effectiveness is a critical decision factor.

Additionally, Intel is adopting a distinct strategy in terms of software development for its GPUs, specifically by adopting an open-source platform. This approach aligns with trends seen in other tech sectors where open-source solutions have fostered greater innovation and collaboration.

Advanced Micro Devices (AMD) has adopted a similar strategy with its new enterprise GPUs, contrasting with Nvidia’s proprietary CUDA platform, which uses closed-source technology. By embracing the open-source philosophy, Intel and AMD are hoping to attract a broader base of developers, and potentially improve their competitive position against Nvidia.

All told, the above indicates that Intel’s new Gaudi 3 offering could position the company to compete with Nvidia more effectively in the enterprise GPU market. But Intel is also going to have to contend with Advanced Micro Devices, which recently introduced the MI300X. 

Editor’s note: We will soon publish a complementary piece focusing on Intel’s rejuvenated foundry business, and the company’s valuation.

Andrew Prochnow has more than 15 years of experience trading the global financial markets, including 10 years as a professional options trader. Andrew is a frequent contributor of Luckbox Magazine.

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