Intel is an enterprise leader, but lacks Nvidia’s scale

Intel (INTC) is making waves — alongside chip competitors Nvidia’s (NVDA) and Advanced Micro Devices (AMD) — at the Computex 2024 conference in Taipei, Taiwan this week, unveiling its newest Xeon 6 processor.

Bank of America Senior Semiconductor Analyst Vivek Arya joins Yahoo Finance from the Bank of America Global Technology Conference to point out several of Intel’s largest headwinds as it tries to expand and compete within the AI chip space.

“They have the [enterprise] incumbency, but they don’t quite have the deployed base, the range of software developers. For example, Nvidia has 5 million developers on their CUDA platform,” Arya says, who raised BofA’s price target forecast on Nvidia to $1,500 per share. “So a lot of the enterprises, as they start to look towards their AI infrastructure, the first name they turn to is Nvidia for the reason that there’s a lot of developers who are already familiar with Nvidia’s infrastructure.”

Watch Yahoo Finance’s full interview with Nvidia CEO Jensen Huang.

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This post was written by Luke Carberry Mogan.

Video Transcript

Vivek, you mentioned customers and it makes me think about Intel’s latest chip announcement and the executives really speaking about this idea that their chips are not necessarily for the hyper scaler, they’re for more of the enterprise customers.

They’re going to be a little bit more affordable.

To what extent do you see that as a winning strategy for Intel moving forward, particularly given the amount of headwinds facing that stock over the course of the past year here?

Sure, absolutely.

I think we have to give Intel uh the credit that they have very strong enterprise incumbency.

They are the brand name, one of the most trusted names in enterprise infrastructure.

But broadly speaking, you know, Intel is facing this challenge where they have been behind in A I, they have the incumbency, but they don’t quite have the deployed base, the range of software developers.

For example, NVIDIA has 5 million developers on their CU A platform.

So a lot of the enterprises as they start to look towards their A I infrastructure, the first name they turn to is NVIDIA for the reason that there’s a lot of developers who are already familiar with Nvidia’s infrastructure and number two, as these enterprises start to scale out, they look towards cloud instances and that too is where they find a lot of nvidia based instances.

So broadly speaking, if I look at the overall A I chip market, uh today, we think it’s about $100 billion or so.

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Uh This year and video has about 80% of that custom chips from Broadcom Marvel and others are another 10 or 15%.

And then you have this long tail, which is a MD, which has Intel, which has a number of start ups.

And even as I look forward over the next 3 to 5 years, as this market doubles or triples from here, we think that ratio will stay relatively in that range, that NVIDIA will continue to have 80%.

You know, we think custom chips will have another 10 or 15%.

And then you will continue to have this long tail of companies that have a presence, the benefit from the rising tide in this market, but they are never quite able to achieve the escape velocity that the leader in the market has.

And by the way, that is not too uncommon if you look at other parts of technology, search social, you know, ecommerce operating system, you see the leader that has the early start, that has the scale the incumbency, the relationship with developers claiming 80 plus percent of the market.

And we see exactly the same thing in the A I market as well.