It is the largest drop for Intel in half a century with huge losses reported in its chip foundry operations and a drop in revenue, even top…
The Fall of Intel, Why Is Intel Losing to Nvidia?
“What Google did in the search business, Nvidia is exactly doing in the AI space”
There is a high probability that the laptop on which you are reading this article has an “Intel Inside” sticker. That’s a great achievement for Intel which shows its dominance in the tech sector for decades. But the question is, if Intel CPU chips have been the heartbeat of tech devices, what has happened in the last few years that has caused Intel’s share price to drop, Intel to lose to Nvidia and the company to miss out on one of the biggest booms in the semiconductor industry? Let’s figure it out today!
Most of you already know, Intel’s main focus is on manufacturing Central Processing Units (CPU’s) even in 2024 they have launched:
- Intel Core 14th Gen HX Processors
- Intel Core U Mobile Processor Series
- Intel Core Ultra Series
- Intel Core Ultra 200V Series (IFA 2024)
- Lunar Lake Processors (expected to release in the third quarter of 2024 which will power 80 laptop designs)
Talking about Inttel presence in manufacting AI chips, they have launched:
- Intel Core Ultra 200V Processors
- Xeon 6 Processors
- Gaudi 2 and Gaudi 3 AI Accelerators
- Lunar Lake Architecture (expected to launch in the third quarter of 2024)
These latest launches from Intel in 2024 show how the company is addressing the needs of gamers, content creators and mainstream users and you might think Intel is doing a great job and is on a path of innovation but the reality is that even after pricing Gaudi 2 and Gaudi 3 AI chips lower than Nvidia’s H100, Intel is still struggling to receive the attention they have expected.
So, from this, it’s clear that Intel is competing with Nvidia, but primarily in the domain of central processing units (CPUs). Meanwhile, Nvidia is thriving in the hottest market of 2024 – GPU manufacturing and distribution.
In an interview, Intel’s then CEO Pat Gelsinger said that Intel aims to be ecosystem friendly. When asked about the AI disruption he mentioned that ‘our products would put pressure on the uncontested Nvidia’ but after three years, Intel is still trying to catch up.
Even After releasing top innovative processors, chips & other advanced products, why is Intel losing to Nvidia?
Top Reasons Why Intel is Losing to Nvidia?
End of 15-Year Apple-Intel Partnership
This is perhaps one of the biggest reasons behind why Intel is falling behind. In June 2023, Apple officially ended its 15-year partnership with Intel by discontinuing the last Intel-based Mac – the Mac Pro.
This end of partnership was hinted by Apple back in 2020 when the company announced its shift to custom-designed ARM-based processors (Apple Silicon). Reasons for this transition was mainly due to frustrations over Intel’s performance and delays in chip development which was hindering Apple innovation.
The first Apple Silicon Macs launched in late 2020 and by mid-2023, the entire Mac lineup was using Apple’s own chips.
Operating Losses in Intel's Foundry Business
This might be the second biggest reason why Intel is lacking behind. In 2023, Intel reported a loss of nearly $7 billion up from $5.2 billion in 2022 in its foundry business.
This huge loss is attributed to a sharp decline in revenue which fell approximately 31% to $18.9 billion. The company agrees that these losses will peak in 2024 before aiming for break even by 2027.
No Innovation in Chip Manufacturing - Reason Behind Fall of Intel
Not innovating in chip manufacturing might be the reason behind the fall of Intel especially from the semiconductor point of view.
Intel has struggled to innovate if we compare it with companies like samsung and TSMC which have advanced to 5nm and even 3nm processes. Even today, Intel is rolling out 10nm chips which has resulted in declining market share to AMD and Nvidia who have capitalized on Intel’s production issues.
In addition to the lack of innovation in chip manufacturing, Intel even missed the opportunity of transition to smaller architecture sizes and the adoption of extreme ultraviolet (EUV) lithography for manufacturing advanced chips.
The Share Market Gap- Reason of Intel Falling
Will Intel Recover From Their Huge Losses?
Share market gap between Intel and its competitors is one of the reasons behind the fall of Intel, for example, the company has faced a huge loss of $27 billion in market value mainly due to ignoring the booming AI sector.
In addition to this, Intel’s recent earnings reports have disappointed investors which leads to a sharp decline in Intel’s stock price. The company’s announcement of reduction in workforce and cost cutting steps has made a negative perception in investors’ minds.
The company’s operating losses in its foundry division and challenges in core market (personal computing and data centers) have compounded these losses which have widened the gap between Intel and its competitors.
Expert stock market analyst’s are saying that Intel’s recovery may not materialize until 2030.
Well there will be fierce competitions between Intel and Nvidia but as of now industry analysts who are covering Intel have a hold rating.
Now it is the time for Intel to wake up and smell its burning market share, the company will have to work on making its Chips more mature which means meeting today’s standards like Nvidia. Not only Intel but any company operating in AI chip manufacturing needs to heavily invest otherwise they will soon be shown the exit gate by the chip consumers.
In conclusion, the battle between these tech giants will define the next era of computing power. Intel’s combination of financial losses, competitive pressures and internal mismanagement has been the pillars of Intel declining market share.
FAQ's
Why is Intel making losses?
As we have discussed in the case study on why Intel is falling, the end of 15 years Apple-Intel partnership, company’s slow transition to advanced manufacturing process, competition from rivals like Nvidia and AMD and separate establishment foundry division are the top reasons behind Intel making losses.
Why does Intel keep falling?
Intel’s keep falling due to continuous operational challenges and a lack of competitive edge in the semiconductor market. Intel also faced a 26% drop in stock price—the worst single-day performance in over 50 years.
Why is Intel stock falling?
Intel’s stock is falling primarily due to disappointing earnings reports and ongoing operational struggles. Additionally, the recent job cut and dividend suspension announcement has alarmed investors, signaling deeper financial issues.
Can Intel bounce back?
Intel’s potential for a comeback depends on its ability to execute decisions like splitting its foundry business from its product design operations. Additionally, investing heavily in new technologies like its Lunar Lake architecture and how it handles competitors from top companies like Nvidia and AMD.
Is Intel too big to fail?
While Intel is a major player in the semiconductor industry with substantial resources, it is not necessarily “too big to fail.” The company faces intense competition from rivals like Nvidia and AMD which have outperformed Intel in innovation and market share.
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