Intel (INTC) unveiled a pair of artificial intelligence chips on Tuesday as it seeks to improve its data center business and steal market share from rivals AMD (AMD) and Nvidia (NVDAThe new chips, the Xeon 6 processor and Gaudi 3 AI accelerator, promise improved performance and power efficiency and come at a time when Intel is trying to prove it has what it takes to be a major player in the AI space.
The announcement follows a Wall Street Journal report that Qualcomm (QCOM) studying possible acquisition of Intel to strengthen its own chip business. Bloomberg, meanwhile, reported that Apollo Global Management is interested in a multibillion-dollar investment in the chipmaker that would support Intel CEO Pat Gelsinger’s massive turnaround plan. (Disclosure: Yahoo Finance is owned by Apollo Global Management.)
Intel says the new Xeon 6 chip features P-cores, or performance cores, and delivers twice the performance of its predecessor. The company says the chip is designed for AI and high-performance computing scenarios, including edge and cloud systems.
The Gaudi 3 processor, meanwhile, is specifically designed for generative AI applications and will compete directly with Nvidia’s H100 and AMD’s MI300X chips. Intel says IBM (IBM) is using its Gaudi 3 accelerators as part of its IBM Cloud with the aim of delivering a lower overall total cost of ownership.
“The demand for AI is driving a massive transformation of the data center, and the industry is demanding choice in hardware, software and development tools,” Justin Hotard, executive vice president and general manager of Intel’s Data Center Artificial Intelligence Group, said in a statement.
“With the launch of Xeon 6 with P-cores and Gaudi 3 AI accelerators, Intel is enabling our customers to implement all their workloads with increased performance, efficiency and security.”
Intel was also quick to point out that 73% of GPU-accelerated servers, servers designed to power AI applications, use Xeon chips as the host processors they need to run properly. But Intel’s chips are no longer the flagship products they once were. Instead, companies are trying to get their hands on Nvidia’s AI chip lineup, driving up that company’s stock price.
Since the beginning of the year, Nvidia’s stock price has increased by 142%, while Intel’s has fallen by 52%. AMD’s stock has increased by 12% over the same period.
In its last quarterly earnings report in August, Intel reported revenue and earnings per share that fell short of expectations and provided a disappointing outlook for the current quarter. The company also announced it would cut 15% of its workforce and suspend dividend payments.
Gelsinger is trying to restore Intel to its former glory by pushing his teams to build more advanced chips for data centers and consumer PCs while simultaneously expanding its manufacturing capabilities.
Intel hopes to dramatically expand its chip fabs, the sites where it makes chips, in the United States and abroad. But the company said last week it would suspend construction of planned factories in Europe and won’t start up its advanced packaging plant in Malaysia until demand for chips recovers.
Intel proposed some good news last week also saying it will build custom chips for Amazon (AMZN), joining Microsoft (MSFT) as another flagship customer for the company’s nascent third-party chipmaking business.
The company also said it was separating its foundry segment from its design business to provide a clearer separation between the two entities, giving potential customers greater peace of mind that Intel’s design team would not have access to their own chip designs.
But Intel’s struggles in its turnaround have made it a takeover target for companies like Qualcomm, which could use the company to dramatically expand its chip business into data centers and PCs.
Qualcomm relies heavily on its smartphone segment. But smartphone sales have slowed over the years as customers hold on to their devices longer, prompting Qualcomm to look for new growth opportunities.
One such opportunity is to make laptop chips to compete with Intel’s line of processors. But it will take a long time for Qualcomm to eat into Intel’s PC market share, if it can do so at all.
Email Daniel Howley at dhowley@yahoofinance.com. Follow him on Twitter at @DanielHowley.
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