AMD and Nvidia Overtake Intel in Key Markets, Challenging Its Leadership

U.S. Chips Act beneficiary Intel Corp’s INTC crisis appears to be worse than expected, as companies ranging from Nvidia Corp NVDA and smaller rivals, erstwhile partners like Microsoft Corp MSFT rush to nab Intel’s market share that is critical for its profitability.

Intel stock plunged 58% in the last 12 months as it failed to capitalize on the budding market of new kinds of computing and new applications for chips, the Wall Street Journal cited Doug O’Laughlin of SemiAnalysis.

Advanced Micro Devices, Inc AMD surpassed Intel’s data center chip revenue in the last quarter, marking a reversal from 2022 when Intel’s data center revenue was three times that of AMD.

Also Read: Nvidia and Intel Competition Threaten AMD’s Growth, Analyst Says

AMD emerged as a nemesis, snatching Intel’s moat in the advanced general-purpose chips business, dubbed central processing units.

Another stroke of bad luck for Intel was its failure to tap the burgeoning data centers chip market or the graphics processing unit market, which catapulted Nvidia to the trillion-dollar valuation. 

Notably, Intel still has about 75% of the market for CPUs that go into data centers which sharply contradicts the company’s share of revenue from data center chips.

Many companies, including Amazon.Com Inc AMZN, Microsoft, and Alphabet Inc GOOG GOOGL Google remains aggressively invested in building out new data centers are bypassing Intel’s proprietary architecture chips, dubbed x86, and are instead using a combination of an Arm Holdings plc ARM architecture and their in-house chip designs.

ARM-based chips are increasingly taking center stage in Nvidia’s current-generation AI systems. ARM-based laptops running Windows struck gold in 2024 courtesy of Microsoft’s collaboration with ARM. This prompting has led to other companies porting their software and creating tools that allow programs to run on the new laptops.

Intel also lost out on the PC gaming market to AMD. A spokeswoman for Intel told the WSJ the company is focused on its product portfolio, manufacturing, and foundry capabilities.

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 TSM, failed to impress the board.

Let us take a look at some positive aspects of Intel. The decades that developers dedicated to software for Intel’s chips bear testimony to its moat despite shrinking market share, potentially limiting its dwindling 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, WSJ cites Mercury Research.

Recently, AMD tapped Intel to develop the x86 ecosystem. Intel also boasts a chipmaking deal with Amazon by leveraging its 18A technology. In 2025, Intel targets the launch of a new AI chip dubbed Falcon Shores.

Meanwhile, Goldman Sachs’ Toshiya Hari and other Wall Street analysts flagged competitive and margin challenges for Intel.

Investors can gain exposure to Intel through Vanguard S&P 500 ETF VOO and SPDR S&P 500 SPY.

Price Actions: INTC stock is down 1.88% at $20.17 at the last check on Monday.

Also Read:

• Nvidia’s $2 Trillion AI Rally In 2024 Fueled by Chips, Startups, and Robotics

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