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Intel ( INTC ) scrapped $500 million Gaudi chip sales forecast for

2024

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CEO attributes slower uptake to software, chip transition

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Analysts question Intel's ( INTC ) AI strategy, competitive

position

By Jeffrey Dastin

Nov 1 (Reuters) - Intel's ( INTC ) upbeat revenue

projections on Thursday masked a sore point for the embattled

company: chips touted for artificial intelligence have not lived

up to sales expectations.

The chipmaker scrapped its recent forecast that in 2024 it

would sell more than $500 million worth of Gaudi accelerator

chips, so called because they speed up the performance of AI

applications.

In a call with analysts, CEO Pat Gelsinger attributed their

slower uptake to software related to Gaudi and a recent

transition from the second to third generation of the chip.

The disappointment underscores Intel's ( INTC ) persistent AI

travails, years after it declined to pick one strategy that

could counter its skyrocketing rival Nvidia ( NVDA ). It also

shows challenges Intel ( INTC ) has faced in delivering on a promise to

investors.

After the late 2022 launch of viral ChatGPT, powered by

Nvidia GPUs, Gelsinger hoped Intel's ( INTC ) AI chips could win new

business.

When teams at Intel ( INTC ) predicted they could sell at most $500

million, Gelsinger told his executives the figure was not high

enough, according to a Reuters special report published Tuesday.

Intel ( INTC ) had to project at least $1 billion when Nvidia's ( NVDA )

comparable sales were much higher, a source cited Gelsinger as

saying. The company did so: in July 2023, Gelsinger touted a

more than $1 billion "pipeline of opportunities" led by Gaudi.

Intel ( INTC ) at the time had not secured enough supply from the

contract chipmaker TSMC to meet the target, two

sources told Reuters.

In an earlier statement, Intel ( INTC ) said Gelsinger's comments

reflected prospective deals accurately.

"No company converts 100% of its pipeline into revenue,"

Intel ( INTC ) said. "We make no apologies for setting ambitious internal

targets for our teams - and we will always try to exceed the

goals we set for ourselves."

By January this year, Intel ( INTC ) told investors more than $2

billion in AI-chip deals were possible. In April, Gelsinger said

he expected over $500 million in such AI revenue in 2024. On

Thursday, he said he scrapped the forecast.

"Taking a longer-term view, we remain encouraged by the

market available to us," Gelsinger said.

Analysts did not mince words.

Vivek Arya of Bank of America asked Gelsinger what business

looked like for Intel ( INTC ) if its CPU chips, or central processing

units, became commoditized and "if there is no competitive AI

product?"

"What is Intel's ( INTC ) AI strategy right now?" Arya asked.

Gelsinger said CPUs are playing an increasing role in data

centers for AI, and customers were showing "good early interest"

in Gaudi. Benchmarks for the chip's third generation were

impressive, he said.

Overall, Intel ( INTC ) reported third-quarter revenue of $13.3

billion, exceeding analysts' estimates. It posted a $16.6

billion loss attributable to the company, after impairment and

restructuring charges.

For Michael Ashley Schulman, chief investment officer of

Running Point Capital, Intel's ( INTC ) cost-cutting and high-growth

focus showed it could rebound.

But he had doubts.

"The concern is that Pat Gelsinger may be exaggerating

prospects and progress," Schulman said. Intel's ( INTC ) CEO, he said,

"may not have as tight of control on operational levers and

customer fidelity as he needs."