Intel is going through some trouble lately. The company’s recent earnings fell short of analysts’ expectations, resulting in a 26% single-day selloff that brought its market cap below $100 billion for the first time in three decades.
Also, CEO Patrick Gelsinger announced to employees last week that the company would reduce its workforce by 15% and cut about 15,000 jobs as part of a significant cost-cutting measure. All this, while he’s also been posting proverbs from the Bible, which made people stress even more about the company.
But this unfortunate time could have played out differently had the company made that one single investment back in 2017. According to reports, in 2017 and 2018, the tech giant had the opportunity to acquire a 15% stake in OpenAI for $1 billion. Additionally, Intel could have secured another 15% stake by offering OpenAI its hardware at cost, according to the sources.
This would have made the company acquire a 30% stake in OpenAI, which is contentiously the leader in generative AI for the past few years. OpenAI sought Intel as an investor to reduce its dependence on NVIDIA, whose chips are possibly powering the entire AI world right now.
A Bet Gone Wrong
Intel declined the offer, partly because it doubted the immediate viability of generative AI models in 2018, which it believed would impact a timely return on investment.
Cut to the present, it can be said that Intel is pushing really hard to make a strong presence in the AI industry. Once a world-leader in chips, Intel failed to capitalise on the AI boom and propelled NVIDIA to become one of the most valuable companies globally.
But it is not just Gelsinger who is possibly praying for his business. NVIDIA chief Jensen Huang is also reportedly paranoid about the future of his company. In a recent podcast with Lex Fridman, Perplexity AI chief Aravind Srinivas revealed that he once asked Huang how he handles success and stays motivated.
To this, Huang had replied, “I am paranoid about going out of business. Every day I wake up in a sweat, thinking about how things could go wrong.” Huang explained that in the hardware industry, planning two years in advance is crucial because fabricating chips takes time.
“You need to have the architecture ready. A mistake in one generation of architecture could set you back by two years compared to your competitor,” Huang said. This definitely puts into perspective how a single investment could have changed Intel’s fortune, since even the CEO of the leading company is paranoid about things going wrong at any moment.
But Intel is Not Sitting Ducks
However, there is some positive news from Intel as well, which shows that the company is not giving up.
For years, Intel focused on enabling CPUs, like those in laptops and desktops, for AI processes, rather than prioritising GPUs, which are more effective for AI calculations. In contrast, NVIDIA and AMD have thrived by concentrating on GPUs, while Intel largely missed the opportunity.
However, in the third quarter, Intel plans to release its Gaudi 3 AI chip, which Gelsinger claims will outperform NVIDIA’s H100 GPUs, possibly even challenging NVIDIA Blackwell architecture.
Continuing with its focus on chips, Intel has also announced that Panther Lake and Clearwater Forest, the leading products on Intel 18A, are now out of the fab and ready to run on operating systems. These would be ready for production by next year.
Several people have cited that Gelsinger would bring Intel back on its feet after having almost lost in the AI race. The OpenAI failed deal of 2017-18 is something that Gelsinger, if he had been leading the company at that time, might have been able to make successful.
In May, Gelsinger had said that the company’s AI strategy is on the right track, which made everyone think Intel was living in denial. “We’re really starting to see that pipeline of activity convert,” said Gelsinger.
But apart from GPUs, Intel’s CPU and NPU plans are still seemingly strong, along with a focus on edge use cases and on-device AI. Since Intel is the majority holder of the laptop industry, with the future of AI racing towards smaller models, it is possible that Intel might rise in a year or two as the leader, spearheading the AI PCs game.
Intel anticipates shipping 40 million AI PCs in 2024, featuring over 230 designs spanning from ultra-thin PCs to handheld gaming devices. There are no PCs without Intel – that’s for sure.
Failed Deals and Poor Quarters are Part of the Game
Undoubtedly, failed AI deals are part of the business. Recently, Elon Musk’s xAI cancelled the $10 billion deal with Oracle. Also, Apple has denied a partnership with Meta for AI.
Intel is not the first one that failed to convert an OpenAI deal. Not many are aware that IT consulting giant Infosys, together with Musk, AWS, YC Research, and a few others, had donated a sizable $1 billion to OpenAI back in 2015, when the latter began as a non-profit organisation. But the donation did not turn into an investment.
What if it is a bigger regret for OpenAI to not have Intel as one of its partners? Since the cost of running its business and AI offerings powered by NVIDIA is significantly higher for the company and is making it struggle to earn revenue, Intel could have helped OpenAI make its own hardware by now.
When it comes to Intel, maybe owning this huge part of OpenAI would have been a failed strategy. Since Microsoft owns 49% of the shares in OpenAI now, things could have been quite different for all three companies.
Moreover, Intel has a sweet spot for India. It has partnered with several companies in India, such as Krutrim, Bharti Airtel, Zoho, and several others, to provide its enterprise and data centre computing services. Maybe, Gelsinger’s interest in India would put Intel on the driving seat soon in the generative AI race.
