Intel is benefiting from a new shift in AI spending
The artificial intelligence boom has boosted chip makers including Nvidia, Micron and South Korea’s SK Hynix.
Now Intel, which has begun to recover from a long slump, is benefiting from a new shift in AI spending. Not only are tech firms buying AI chips known as graphics processing units, made by companies like Nvidia, but increasingly they’re also buying microprocessors known as central processing units — which is exactly what Intel makes.
The bonanza was evident on Thursday when Intel announced its financial results. The Silicon Valley company said its revenue rose 25 percent to $16.1 billion in the latest quarter, driven by nearly 60 percent growth in its data center segment, which includes chips that power AI applications and cloud services.
The results and projections for further growth were well above Wall Street expectations, sending Intel shares up nearly 9 percent at one point in after-hours trading.
“AI is fueling unprecedented demand for computing,” Intel chief executive Lip-Bu Tan said in a statement, adding that revenue growth was the strongest in 15 years.
Intel is still losing money from layoffs and related restructuring costs that Mr. Tan ordered after taking the top job last year. The company lost $11 billion in the most recent quarter, up from a $2.9 billion loss a year earlier. The wider loss stemmed from a revaluation of shares held in escrow in connection with the US government’s $8.9 billion investment in Intel last year.
However, Intel’s upward trajectory is unmistakable, and its stock quadrupled between January 1 and the end of June.
Much of this was due to a shift in AI spending. Back in the AI boom, buyers wanted GPU chips from Nvidia that could do many simpler jobs simultaneously. Central processing units, or CPUs, played a role in AI servers, but could be outnumbered by GPUs at least four to one.
Recently, artificial intelligence products called “agents” that can “think” and act on information have become more popular. These programs require a larger share of microprocessors to run. As a result, research firms such as Creative Strategies have predicted that AI data centers will increasingly purchase roughly equal numbers of CPUs and GPUs.
“It’s not just a GPU game anymore,” Santosh Janardhan, Meta’s head of infrastructure and co-head of engineering, said recently. “CPUs are becoming at least as important, if not more so.”
Not only Intel benefits from this shift, but also its competitor Advanced Micro Devices, which is steadily gaining market share in data center servers and successfully developing GPUs for AI tasks. AMD on Thursday unveiled more powerful CPUs and GPUs, as well as new “rack-scale” systems — complete computer boxes taller than a refrigerator — that integrate CPUs, GPUs, networking, data storage and other technologies.
Anthropic, a leading artificial intelligence start-up, has also committed to buying new hardware from AMD — which estimated the deal to be worth tens of billions of dollars — and will receive up to $5 billion in investment from the chipmaker. OpenAI, Anthropic’s rival, also said it will use AMD’s new rack system.
Meanwhile, Nvidia has been pushing its own microprocessors for AI, including a new model called Vera. Major data center operators such as Amazon, Microsoft and Google have also developed their own microprocessors.
Intel still retains some unique assets, including its own factory network. They compete with Taiwan Semiconductor Manufacturing Company, the largest maker of advanced chips, both in creating the chips and in the increasingly important task of packaging them to work together.
This so-called foundry service has recently acquired customers such as Apple, which has relied almost exclusively on TSMC.
Intel said sales growth of its server chips over the past year was the strongest on record, with its latest Xeon 6 version one of its fastest-selling products ever.
Although demand for such data center products is strong, Intel said this week that it has cut some employees in the business to improve efficiency. She did not disclose the numbers.
The company added that the productivity of its latest manufacturing technology was improving and that its foundry business grew 31 percent to $5.8 billion, although the unit posted an operating loss of $2.1 billion.